Marston's

Marston’s PLC Annual Report and Accounts 2019

A Snapshot of 2019

Revenue

£1,173.5m 

+3%

-2%

-3%

-3%

Underlying* operating profit

£178.7m 

Underlying* profit before tax

£101.0m 

Underlying* earnings per share

13.5p

Total dividend per share

7.5p

Statutory loss before tax

£20.0m

Revenue growth in all trading 
segments; earnings momentum 
in drinks businesses.

Sales growth in both pub 
segments and continued growth 
in brewing.

Improved operating cash flow.

Debt reduction of £200 million 
between 2020–23 progressing 
well; targeting at least £70 million 
disposals of non-core pubs and 
assets in 2020, £50 million 
of which already exchanged 
or completed.

Full year dividend maintained 
at 7.5 pence per share. Dividend 
cover at 1.8 times.

Clear plans and objectives 
for 2020.

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, the loss before tax was £20.0 million 
(2018: £54.3 million profit) and the loss per share was 2.8 pence per 
share (2018: 7.1 pence per share profit), reflecting the impairment 
of properties and the adverse impact of the swap mark-to-market as 
a consequence of well-publicised lower gilt yields. A reconciliation 
between the underlying results and the statutory numbers can be found 
in the Group Income Statement on page 85.

Strategic Report approval
The Strategic Report, outlined from the inside front cover to page 40 
incorporates: A Snapshot of 2019, Our Investment Case, At a Glance, 
Chairman’s Statement, Chief Executive’s Statement, Our Business 
Model, Resources and Relationships underpinning our Business Model, 
Stakeholder Engagement, Our Marketplace, Our Strategy, Our Key 
Performance Indicators, Group Operating and Financial Review, 
Non-Financial Information Statement, Risks and Risk Management, 
Our Principal Risks and Uncertainties, Our Levels of Defence, and 
Corporate Responsibility.

By order of the Board

Ralph Findlay
Chief Executive Officer

27 November 2019

About Us

In This Document

Strategic Report
A Snapshot of 2019
Our Investment Case
At a Glance
Chairman’s Statement
Chief Executive’s Statement
Our Business Model
Resources and Relationships underpinning our Business Model
Stakeholder Engagement
Our Marketplace
Our Strategy
Our Key Performance Indicators
Group Operating and Financial Review
Non-Financial Information Statement
Risks and Risk Management

Our Principal Risks and Uncertainties
Our Levels of Defence
Corporate Responsibility

Governance
Chairman’s Introduction
Board of Directors
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report:

Annual Statement by Chairman
Remuneration Policy
Remuneration Summary 2019
Annual Report on Remuneration

Directors’ Report
Statement of Directors’ Responsibilities

Financial Statements
Five Year Record
Independent Auditors’ Report to the Members of Marston’s PLC
Group Income Statement
Group Statement of Comprehensive Income
Group Cash Flow Statement
Group Balance Sheet
Group Statement of Changes in Equity
Notes to the Group Accounts
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Accounts

Additional Information
Information for Shareholders
Glossary
Pubs-restaurants and lodges completed during the period

We have more than 14,000 
employees and a diverse estate 
of over 1,400 bars, pubs and 
lodges, breweries, depots and 
offices that allows us to offer 
something for every guest, 
customer and community. 

It is our purpose to bring 
people together for happy and 
meaningful experiences. We do 
this by empowering and enabling 
our teams across every part of 
our business.

Find out more online
This year we have incorporated information on our community involvement 
and our people into our main narrative report. More case studies about 
Marston’s and additional Corporate Responsibility information can be found 
on our website. www.marstons.co.uk/responsibility

For a full year-end press release, preliminary results presentation  
and webcast, visit: 
www.marstons.co.uk/investors

1

IFC
2
4
6
7
8
12
15
16
18
24
26
29
30
31
35
37

42
44
46
50
52
54
54
57
65
66
73
76

78
79
85
85
86
87
88
89
124
125
126

136
139
140

Marston’s PLC Annual Report and Accounts 2019Strategic Report2

Our Investment Case

Our unique culture is what makes Marston’s different: we are 
passionate about our business and proud of its heritage. We take pride 
in doing things properly and we run our business in an ethical and 
responsible way to deliver long-term sustainable growth.

Our people
Our people are engaged, involved, motivated and 
proud to work for Marston’s.

“ I really enjoy working for 
Marston’s. The people are 
friendly, welcoming, and 
are always available to 
give advice.”
Daniel Smith, Engineer Apprentice

Clear and consistent strategy
Our pubs business operates across all segments 
of the market, catering for a broad range of guests.

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.

See page 18 
for more information

Good track record
Average profit per pub in line with 
last year and increasing by around 
7% after the disposals announced 
in November 2019.

Completion of Charles Wells Brewing 
Business integration delivering 
£4 million targeted synergies.

We create value through our use 
of capital; we have committed 
to targeting a £0.2 billion reduction 
in net debt by 2023 and we have 
a stable dividend payment.

Increase in average profit 
per pub since 2012

55%

Increase in total 
underlying revenue

2.9%

Total dividend per share

7.5p

Marston’s PLC Annual Report and Accounts 20193

Lobster Pot, Bridlington

Future growth plans

Roll out of a programme that will 
see all our pubs receive investment 
on a five year cycle, ensuring 
that our estate is maintained and 
refreshed consistently.

Additional £2 million investment in 
training. Through our Talent Academy 
Online, which is available to all of our 
people, we are aiming to reduce staff 
turnover in key roles during 2020, and 
we have plans to further improve skill 
levels in our kitchen teams.

Our new recruitment website launches 
in 2020 and we continue to invest 
in apprenticeships.

Investment and innovation in digital 
including: a marketing initiative aimed 
at improving the use of social media 
locally, the introduction of flexible 
payment facilities for our guests, the 
completion of our new EPOS system 
in 2020, and continuing to build 
on the capabilities of our data team.

Our beer business continues 
to grow through its great portfolio 
of beers, trusted by on-trade and 
off-trade customers and consumers, 
our expertise and capacity in contract 
services and logistics.

Focus on a long-term sustainable 
business with plans to further reduce 
energy consumption and our carbon 
footprint with a planned investment 
of £1–2 million.

Secure financing and valuable assets
The financing of our business is supported by a combination of a 
long-term debt structure and an agreed bank facility for the next five 
years; fixed charge cover is 2.5 times.

Our estate has been valued at £2.1 billion and 91% of that is freehold.

Estate value

£2.1bn

Marston’s PLC Annual Report and Accounts 2019Strategic Report4

At a Glance

We have three operating segments supported by Group Services, 
as set out below, which reflect different guest profiles, flexible 
operating models, products and services.

Destination and Premium 
•  Larger food-led managed pubs, premium bars 

Taverns 
•  Community and independently run pubs, either 

Brewing
•  Six breweries producing a wide portfolio 

and restaurants, accommodation.

managed, franchised or tenanted.

of cask, keg and packaged beers.

•  Marston’s Two for One, Heritage, Milestone 

Rotisserie, Milestone Carvery, Accent, 
Firebrand, Pitcher & Piano, Lost & Found, 
Foundry and Revere Country.

•  Typical guests: value seekers or those looking 

for a premium experience.

•  Great pubs with a licensee who connects with 
their community or that maximise the abilities 
of skilled entrepreneurs.

•  Key brands: Pedigree, Hobgoblin, Wainwright 
and Shipyard and licensed brands including 
Estrella Damm.

•  Typical guests: those wanting to enjoy a drink, 
socialise and be entertained with people from 
their community.

•  Local provenance in regional markets with 
Banks’s, Jennings, Mansfield, Ringwood, 
Brakspear and Eagle.

Rooms

1,593

Locations

412

Underlying revenue

Rooms

90

Locations

1,125*

Underlying revenue

•  Typical consumers: discerning and 

knowledgeable drinker at home and away 
from home (in pubs, clubs and bars).

Locations

18

Underlying revenue

£460.1m

+2.1%

£324.1m

+3.9%

£389.3m

+3.1%

Underlying operating profit

Underlying operating profit

Underlying operating profit

£87.1m

-2.6%

£86.3m

+0.2%

£32.6m

+1.9%

* Number of pubs does not reflect the disposal of 137 pubs completed in November 2019.

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. All are focused on setting the strategic, financial 
and governance framework to deliver growth to investors, our people and the communities in which we operate.

Marston’s PLC Annual Report and Accounts 20195

Marston’s estate in 2018/19

We operate across the UK and are focused on maximising our return on investment from our high quality estate, which we continue to strengthen 
through organic development of pub-restaurants, bars and franchise-style pubs. Our six breweries and 12 depots and distribution centres 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.

21

250

Scotland

North of
England 

Midlands

Wales

South of
England 

103

334

232

1

4

135

565

477

2

3

123

127

556

3

4

30

99

168

1

Key

Destination and Premium

Taverns

Rooms

Brewing

Distribution centres and depots

Marston’s PLC Annual Report and Accounts 2019Strategic Report 
6

Chairman’s Statement

I am pleased to note that guest satisfaction and food hygiene measures 
improved significantly in 2019. The challenge of balancing top line targets 
and rising costs whilst prioritising customer service remains a key priority 
for 2020.

Underlying earnings per share were 13.5 pence per share (2018: 
13.9 pence per share). Statutory loss per share was 2.8 pence per share 
(2018: 7.1 pence per share profit).

Dividend
The Board recommends a final dividend of 4.8 pence per share, bringing 
the full year dividend to 7.5 pence per share, unchanged compared to 
2018. Dividend cover is 1.8 times and, in the medium term, our dividend 
policy remains to maintain cover of around 2 times. We expect to 
maintain the dividend at current levels at least until the end of the debt 
reduction period.

Market and Brexit
Consumer confidence has been weaker in recent months and uncertainty 
over political and economic direction has made forecasting more difficult. 
Our sector faces significant cost challenges and skills shortages, and we 
hope that the Government will help to address these pressures when Brexit 
is resolved.

Our strategy is appropriate for current market conditions.

Our people 
I am grateful for the hard work and dedication of all at Marston’s who 
contribute to our performance, and to the open, down-to-earth and friendly 
culture that is evident across the business. At the same time, professional 
capability was recognised through several awards in 2019 in relation to 
environmental matters, female executive management talent, apprenticeships 
and beer brands, and I congratulate all those involved.

The Board
Catherine Glickman will step down from the Board at the Annual 
General Meeting in January 2020. She will be succeeded as Chair of 
the Remuneration Committee by Octavia Morley, who joins the Board 
as a Non-executive Director in January bringing extensive executive and 
non-executive experience. I would like to thank Catherine for the knowledge 
and contribution that she has brought to the Board.

I was delighted to welcome Bridget Lea as a Non-executive Director in 
September 2019. Bridget is a senior executive with Sainsbury’s PLC and 
brings valuable operational experience and consumer insight.

Outlook
Although the market is currently challenging, our strategy is for the long term.

Marston’s has a strong culture, great brands, pubs, and heritage. I am 
confident that shareholders will see these attributes recognised in increased 
shareholder value over time.

“ Marston’s has a strong 
culture, great brands, 
pubs, and heritage.”

On joining the Board last year, I stated that we would review our strategy 
and financial targets in view of current market conditions. We have done that 
and, in 2019, have significantly increased our focus on cash generation and 
debt reduction. As a consequence, we reduced growth capital spend on 
new-build pubs and lodges in 2019, and have no plans for new openings 
in 2020.

Instead, our operational priorities will focus on driving better performance 
from the assets we already own, and in further improving guest and 
customer measures.

As reported in May, we are targeting a £0.2 billion reduction in debt 
by financial year 2023. We have made good progress and, in November, 
announced the disposal of 137 smaller pubs for £45 million. We are now 
aiming to bring forward the debt reduction target date and have increased 
our disposals target in 2020 from £40 million to £70 million.

Results
Turnover increased 3% to £1.2 billion, reflecting the positive impact of 
new openings, pub acquisitions, like-for-like sales growth in pubs and 
growth in brewing helped by new distribution contracts.

Underlying profit before taxation of £101.0 million was £3.0 million below 
last year (£104.0 million). 

This was below our target for the year. Our pubs reported like-for-like 
sales growth of 0.8% in comparison with 2018, and our brewing business 
achieved growth, but this was not sufficient to offset cost increases, 
with labour costs rising above the general level of inflation.

William Rucker 
Chairman

On a statutory basis there was a loss before tax of £20.0 million 
(2018: £54.3 million profit) principally arising from non-cash adjustments 
which are largely outside our control; they do not have any direct impact 
on cash generation or our debt reduction target.

Marston’s PLC Annual Report and Accounts 2019Chief Executive’s Statement

7

as a result of the successful roll out of the new EPOS system. In brewing, our 
strategy to provide a range of beer styles with a focus on regional, premium 
and craft beers, together with the benefit of new distribution contracts, has 
contributed to market outperformance, with total volumes up 1%.

Strategy and objectives
Our trading performance in 2019 was strong in wet-led pubs and brewing, 
despite challenging comparatives which included the benefits of the 2018 
World Cup and a hot summer, but with more subdued sales in food-led 
pubs. This performance was consistent with market trends. Pub like-for-like 
sales increased by 0.8% and brewing volumes were 1% ahead of the 
previous year.

When we achieve the debt reduction target, our intention is to continue to 
operate a high quality pub and beer business generating sustainable and 
consistent net cash flow after dividends of at least £50 million per annum. 
This will provide us with the optionality to continue to reduce the Group’s 
overall levels of debt or, alternatively, inject additional growth investment 
into the business, having regard to re-evaluating the optimal gearing level, 
market conditions and opportunities available. 

Details of the progress made so far is set out in the Group Operating 
and Financial Review on page 26.

Our people and culture
Our business is all about bringing people together and helping them to 
feel good. We have a committed and loyal team of over 14,000 people 
who are critical to our success, so it is essential that our people work well 
together, care about each other, know what they have to do and always 
strive to be the best. The labour market is tight in a number of areas, 
particularly in pub management. Given that the calibre of pub and kitchen 
management is a key determinant in the success of individual pubs we 
have introduced a number of initiatives, including revised incentive plans, 
to reduce employee turnover and identify a stronger pipeline for future 
appointments. For hourly paid employees in pubs, we introduced new 
employment contracts this year which guarantee minimum hours to replace 
zero hours contracts, which do not always suit the needs of our people.

We completed an employee engagement survey in September 2019. 
Across the business, employee engagement remains high and above 
average for UK businesses.

Current trading and outlook
In the first seven weeks of the period pub like-for-like sales are ahead of last 
year and beer performance is in line with expectations. As noted previously, 
the majority of profit in the first quarter is generated over Christmas and 
New Year and we are well prepared for this all-important trading period. 

As noted earlier, consumer confidence remains weak. Brexit, political 
uncertainty and real-wage pressures further impact on consumer confidence 
but, to date, there has been no marked change in spending patterns across 
the business.

Brexit contingency plans are in place to ensure we are as prepared as 
we can be for the critical Christmas and New Year trading period though 
current indications are that the risk of a disorderly Brexit have reduced. 
If a disruptive exit from the EU does happen we believe it would impact the 
wider sector in relation to the cost of goods and labour. Our direct exposure 
is relatively limited, with only 5% of our workforce of non-UK EU origin.

The year ahead will be a 53 week period and will see the implementation 
of IFRS 16 which will impact a number of the reported KPIs. Further information 
is provided in the Group Operating and Financial Review on page 26 and 
in Note 1 of the Financial Statements on page 89.

Ralph Findlay
Chief Executive Officer

“ A robust performance 
given weak consumer 
confidence and 
rising costs.”

Group overview
Our financial results represent a robust performance given weak consumer 
confidence and rising costs. The strengths of our business model include 
freehold asset backing, a mix of operating segments including brewing, 
wet-led pubs and bars and food-led pubs, and a secure long-term 
debt structure.

2019 performance overview
During the year we reviewed our strategy and, in light of the current political 
and economic uncertainty, determined that we would prioritise debt 
reduction and cash flow. Specifically, in January this year we set out a plan 
to reduce the Group’s net debt by £0.2 billion by 2023, with a commitment 
to maintaining the dividend during this period.

As a consequence of this review we have reduced growth capital spend 
on new-build pubs and lodges in 2019, and have no plans for new openings 
in 2020. Our operational and investment priorities will be focused on driving 
exceptional performance from the assets we already own, and on further 
improving guest and customer measures. To support these objectives we will 
reallocate some capital investment into our existing pub portfolio, creating 
an even higher quality business and driving higher returns on capital.

We have made good progress in implementing the debt reduction plan 
to date. In the 2019 financial year operating cash flow increased by 
£13 million to £196 million and, for financial year 2020, we have raised 
the disposals target from £40 million to £70 million, with a targeted net cash 
inflow for the year of £45–55 million. As a result of this good progress we 
are aiming to achieve the debt reduction target within a shorter timeframe.

The Chairman’s Statement provides details of underlying and statutory 
earnings and profit and further details are set out in the Group Operating 
and Financial Review on page 26.

In wet-led pubs, we have also benefited from our flexible approach, which 
includes managed, tenanted and franchise-style operating models, and 
from focused, targeted investment. In food-led pubs, menu development 
has mirrored market trends towards healthier food and, improved guest 
service measures reflect increased training and retail systems development,

Marston’s PLC Annual Report and Accounts 2019Strategic Report8

Our Business Model

Our core business is running pubs, brewing, selling and delivering beer; 
something we have done for over 180 years. Whilst our business has 
grown and changed in that time, it is still focused on delivering robust 
and sustainable long-term returns from offering guests and customers 
a great experience.

Our 
purpose:

We add 
our key 
ingredients:

To do what we have 
done for over 180 years:

To build 
relationships  
and bring 
people 
together, 
creating 
happy, 
memorable 
and 
meaningful 
experiences.

Brands

Insight and  
innovation

Financial  
capital

People

Operating a high quality  
pub and rooms business 
and operating a ‘best in 
class’ beer business

Property

See pages 12–13 
for more information

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, our unique culture, 
and how we use our property, our brands, our innovation 
and insight and our disciplined approach to finance.

Measured by our KPIs
Financial

Group

Underlying earnings per share (EPS)

Employee engagement

Net cash flow (NCF)

FTSE4Good ESG score

Cash Return on Cash Capital Employed (CROCCE)

Marston’s PLC Annual Report and Accounts 20199

To create:

Delivering success:

Food 
36 million meals 
served by our pubs

Hospitality 
apprenticeship 
employer of the year

Drink 
95 million pints sold  
by our pubs

Contract Services 
We brew and bottle 
ales on behalf of 
other businesses

Distribution 
Our national distribution 
network delivers to over 
11,000 customers

Exports 
We export beer 
to 61 countries

Best neighbourhood  
pub menu

Best ale supplier

Recycling partnership 
excellence

A great guest experience

A high quality, balanced pub estate*

An unrivalled portfolio 
of beer and brands

Complete customer solutions

*The King Brychan, Merthyr Tydfil

Pubs and bars

Beer business

Like-for-like sales

Total own ale – market share

See page 24 
for more information

Critical role turnover

World beer – market share growth

Happiness score

On time in full (retail and logistics)

Marston’s PLC Annual Report and Accounts 2019Strategic Report 
10

Our usiness odel
Our Business Model continued
 M

 B

Pubs and bars

Lost & Found, Sheffield

We are focused on operating a high-quality pubs and rooms business 
offering great places to drink, eat and stay.

While pubs may have changed a lot over the years, the reasons people 
use them remains the same. The pub is where we go to socialise, celebrate, 
share an experience or simply enjoy a cold beer or a bite to eat at the end 
of a long day. We are at the heart of local communities, offering a warm 
welcome and value for money.

Our biggest contributor of profit comes from the sites under our direct 
management and our flexible approach enables us to select the right 
operating model and proposition for each pub to maximise its return.

Ability to link our brewing heritage 
to the pub brand.

Room guests offer an increased 
contribution from drinking and eating 
in our pubs.

Operating model

Success factors

Value created

Proposition

Family

Community

Premium

Rooms

Managed – ‘Work for us’

Franchised – ‘Work with us’

Leased – ‘Partner with us’

Growth in sales through 
increased spend per head 
or number of visits

Engaged teams and 
happy guests

Our balanced pub portfolio 
has delivered a long track 
record of sales growth.

Average profit per pub has 
increased 55% since 2012.

Quality and value: best 
experience rather than 
lowest price

Service: a focus on 
guest satisfaction

Experience: creating an 
enhanced environment 
to attract new and 
returning guests

Enhancing the drinks portfolio 
to create more premium 
offers provides choice for 
different occasions.

Investing in our pub teams 
will improve engagement, 
reduce employee turnover 
and ultimately improve 
standards of service.

Reducing the complexity 
of food menus and simplifying 
the guest journey will improve 
the offer and experience.

Focusing on pub values within 
a range of guest offers that 
reflect modern tastes and 
trends providing something 
to suit everyone. 

Places that allow people 
to drink, eat and stay, that 
create a sense of belonging 
to a community.

Different models provide 
flexibility to maximise the return 
from each pub and attract 
licensees to run a pub under a 
business arrangement that best 
suits their needs.

Measured by our KPIs 

See page 24 
for more information

Like-for-Iike sales

Critical role turnover

Happiness score

Marston’s PLC Annual Report and Accounts 201911

Beer business

We are focused on operating a ‘best in class’ beer business with our blend 
of traditional and contemporary breweries, crafting a portfolio of cask, keg, 
bottled and canned beers with appeal for all types of drinkers. We have 
extended our offer to include an award-winning range of exclusive world 
beers and ciders.

In addition, we operate our own national distribution network to supply 
and distribute not only to our own pubs but also to other customers: from 
supermarkets to the local shop and other pub and leisure businesses.

Building on our heritage and expertise we have evolved our business further 
to include a contract services business, initially aimed at maximising brewery 
capacity, brewing and distributing ales on behalf of other businesses.

We distribute to around one quarter 
of the UK’s on-trade outlets.

We package a significant proportion 
of the UK premium bottled ale market.

Proposition

Beer brands

Customer offer

New product innovation

Brewing expertise

Local provenance

National reach

Craftsmanship 

Expertise

Success factors

Value: highest quality 
at optimum cost

Capacity utilisation 

Consolidation opportunities

A team that differentiates us

Value created

Increased sales through 
an unrivalled portfolio 
of beer and brands

Complete customer 
service solutions

A portfolio of local, national 
and global brands provide 
consumers with a wide choice 
of beers including premium, 
craft and an increasing range 
of low and no-alcohol drinks.

Our team of in-house master 
brewers ensure our beers meet 
exacting standards to create 
consistent quality.

Insight-led thinking supports 
the development of new 
products that meet changing 
consumer preferences.

Our annual On-Trade and Off-
Trade Beer Reports add value 
to our customers own offerings.

Targeted sponsorships promote 
and broaden our appeal.

Investment in our facilities, 
equipment and systems has 
enhanced our capabilities and 
improved our efficiencies.

Our reputation for service 
excellence creates opportunities 
for new business.

Our range of own beers, 
licensed brands and wider 
drinks offering provides our 
sales teams with greater 
opportunities to grow our 
customer base.

Our expertise in 
brewing, packaging and 
distribution attracts many 
industry customers.

91.5% of own-brewed volume 
is sold externally.

Measured by our KPIs 

See page 25 
for more information

Total own ale – market share

World beer – market share growth

On time in full (retail and logistics)

Marston’s PLC Annual Report and Accounts 2019Strategic Report12

Resources and Relationships 
underpinning our Business Model

Our competitive advantage
comes from the quality of 
our people.

Our people – our biggest enabler 
We know that the key to unlocking the potential of our people is to engage, 
involve and motivate them, whilst enabling them to make decisions, take action 
and play their part. We invest in our people and their future, as much as they 
invest in Marston’s. We devote time, effort and resources in making sure that 
our people feel enabled and inspired to be their best, delivering a great guest 
experience and supporting value creation. 

We aim to attract and retain the best talent across all parts of our business. 
We strive to nurture and create a working environment where all team 
members are equally valued, truly supported and duly recognised for their 
contribution. Our People Strategy clearly articulates the way in which our 
people will both lead and participate in making the changes necessary 
to realise Marston’s ambitions. We will do this through transformational 
leadership and enabling an inclusive high-performance culture.

The engagement and enablement of our people is key to our success. 
Working in strategic partnership with leaders and managers across all 
areas of the business, our focus is to make sure that our teams have the 
necessary tools and support to deliver the required actions that enable 
and inspire our people to be their best.

Our activities support our people from recruitment and early career 
development, continuing personal and professional development, performance 
and talent management, to succession planning. We nurture the highest 
standards of leadership to sustain a motivated and engaged workforce which 
creates an inclusive high performance and customer focused culture that 
balances the need for stimulating and challenging work with a healthy lifestyle.

Our People Strategy is built up of four key strategic priorities, each of which support value creation:

1. How we bring people in 

3. How we grow our people 

Attracting and retaining the best people, giving them the best start
One of our key focuses is to ensure that Marston’s becomes an employer 
and partner of choice, developing creative and new ways to attract the 
best talent. We work with our leaders to fully understand their requirements 
for the future and develop workforce plans to meet their demands, 
including the identification of critical roles across the business and develop 
strategies to minimise risk. Examples of how we do this are focusing on 
raising awareness of hospitality as a career choice and growing our early 
talent pipeline through work experience and apprenticeships.

Our recruitment processes and practices are inclusive, simple, 
straight forward, consistent and ensure that we deliver an integrated 
recruitment and induction process that is aligned to our values.

2. How we treat our people 

Creating a positive working environment for our people, bringing 
to life our Ways of Working
We continue to articulate our Ways of Working and expected 
behaviours for our people, which ensures a diverse, inclusive 
and enabling culture. Working with our leaders and managers, 
we identify the engagement and enablement priorities that support 
our people to be their very best. 

We recognise the importance of the employee voice as a vital 
enabler to business performance. We provide opportunities to make 
sure that every employee is able to voice what they see as important, 
encouraging productivity and organisational improvement.

Releasing the potential of our people and building 
capability for the future
We develop a performance culture, through our Performance, Career 
and Development Review process and Personal Development Plans, 
where an individual’s personal and career development is supported. 
Retaining internal talent and providing opportunity for all employees 
to be their best is core to our strategy. A key focus is to continue 
effectively utilising apprenticeships to develop knowledge, skills 
and behaviours and provide career pathways to enable long-term 
development, progression and support succession planning.

4. How we enable our people 

Recognising and supporting our people to achieve great results
We recognise that we need to be clear about our reward and 
benefits priorities. Our reward plan focuses on ensuring that we 
deliver the basics to inspire and motivate our people to be the very 
best they can be. 

Core HR excellence covers our business critical processes that are 
vital to the credibility and success of any high performing business. 
We develop and continually improve those processes and system 
capabilities to meet the demanding needs of our business. To support 
the delivery of the business strategy, we will fully utilise our metrics to 
drive greater insights and decision making. Our code of conduct, 
The Marston’s Way, provides guidance and direction in how to work 
in an ethical and responsible manner.

Marston’s PLC Annual Report and Accounts 201913

High quality freehold pub estate

Innovation and insight

Our sales are dependent on executing our food, drink and service 
consistently and adapting to key trends. We monitor data and trends 
in the UK eating-out and drinking markets and use our insights to
improve our guest experience. Our pub teams develop and evolve the 
food, drink and service offerings in response to this and collaborate 
with our beer teams to maximise the guest experience in-pub through 
range, quality and consistent delivery of the perfect pint.

How this supports value creation
•  Guests who feel they are getting value for money (not low price) 

will return

•  Promoting the role of the pub in bringing people together through 
enhanced social experiences creates a sense of belonging to that 
community and encourages frequency of visit

•  Reducing the complexity in food menus to ensure consistent 

execution supports a better guest experience

Our balanced business model is underpinned by our predominantly 
freehold pub estate of around 1,400 pubs. Our flexible operating 
models ensure we have the right guest offer for each pub.

How this supports value creation
•  Higher quality of earnings
•  Improved profit per pub
•  Enhanced guest experience

Wet-
led

Taverns

Destination and 
Premium

Food-
led

Managed

Leased

Independent

Valued and recognised brands

Financial capital

We have an extensive portfolio of beers with strong brands in local 
and national ale; standard, world and discovery lagers; as well as craft 
beers; and a strong low and no-alcohol range.

How this supports value creation
•  Broad appeal with focus on the growth areas of the market
•  Keg, cask, bottled, canned and mini keg enables our teams 

to deliver the right pack format for all drinker occasions

•  Ability to offer differential ranging to customers, getting the right 

beers in the right outlets
•  National trading footprint
•  Value-adding partnerships with licensed brands and supply chain

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
•  91% 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)

745

776

358

296

19

364

246

18

806

301

222

17

Securitised

Sale and leaseback

Bank and cash

Marston’s PLC Annual Report and Accounts 2019Strategic Report14

Resources and Relationships continued

Our business model also depends on strong relationships with 
our 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 37 expands on our approach and the relationship with our guests and customers, our people, our suppliers, 
our communities and our environmental impact.

Our guests and 
customers

Our community

The environment

To keep attracting our guests to our pubs 
we ensure we keep them at the heart of 
all we do by offering choice and value, 
as well as a great experience and always 
striving to exceed their expectations. 
Offering memorable experiences, whilst 
still offering value for money, is key to the 
relationship with our guests. For our beer 
and drinks customers it is our trusted partner 
status which is valued the most; our quality of 
service, delivering brands and innovation that 
help to support their businesses, and at price 
levels which allow them to grow their own 
customer base.

Our pubs and breweries are a physical 
part of the communities where they are 
located. Their relationship with the community 
is more than just a place to eat and drink, 
it is where happy times with family and 
friends are shared and where memories are 
created. In a modern digital age the pub is 
where people in a community meet each 
other, talk, laugh and enjoy one another’s 
company. Our pubs and breweries have 
been part of the historic character of our 
cities, towns and villages over many years. 
We have never taken this special relationship 
for granted.

Our pubs and breweries are both sustained 
by and impact upon the environment. This is 
true at a local physical level as well as an 
indirect global level, particularly through 
our global sourcing of food. Every year we 
publish details of our environmental impact 
together with the innovative solutions in 
which we have invested in to reduce that 
impact. We recognise the huge challenge 
we face from climate change and the part 
our business has in helping our country to 
move closer to reducing its emissions to ‘net 
zero’. We understand the destructive nature 
of waste in terms of volume and the potential 
dangers if not correctly controlled.

Our suppliers

Our investors

All our activities are dependent upon our 
suppliers. Our business model is based upon 
the utilisation of their services and the provision 
of raw materials and products into our business, 
at prices which underpin our own profit 
generation, and ultimately deliver our guest 
offering at the price points that they demand. 
Quality of service and product are of the highest 
priority because both are vital to achieving guest 
satisfaction. Relationships with our key suppliers 
are managed in a responsible way, with mutual 
respect for the commercial interests of our 
businesses. We insist upon an ethical approach to 
business that reflects our own values with regard 
to employees, the environment, quality control, 
legal compliance and integrity.

We want to attract long-term investors who 
believe in and support our strategy. This enables 
us to remain focused on delivering sustainable 
growth and maximising return on capital invested, 
for the benefit of all our stakeholders.

The government

Government policy decisions impact the 
Group and, directly and indirectly, all of our 
stakeholders. For example, the introduction of the 
Apprenticeship Levy and changes to the National 
Living Wage and National Minimum Wage on 
our employees, and legislation on environmental 
issues. As a responsible business we engage 
with, for example, UK Government Public Health 
on health initiatives. We also collect and pay 
a wide range of taxes totalling £528.8 million 
(2018: £530.9 million).

Marston’s PLC Annual Report and Accounts 201915

Stakeholder Engagement

How we engage

Key topics raised

Our response

Our people

This year we reintroduced our engagement 
survey that reaches all of our 14,000 
employees. Hundreds of career and 
development conversations are held every 
year and early in 2020 we will hold 
our first workforce engagement sessions, 
each of which will be attended by a 
Non-executive Director.

Our guests and customers

We collect feedback through a variety of 
methods. We analyse that data and trial 
new products, update our menus regularly 
and refurbish our pubs.

Our communities

We host local events and open days at 
our breweries and pubs. We support 
charitable giving, volunteering days by our 
employees and fundraising through our annual 
‘Community Heroes Campaign’. We are 
a local employer and want to contribute 
to the communities in which we operate.

Our suppliers

•  Communication
•  Training
•  Apprenticeships
•  Engagement

•  Clear communication of future Company goals and plans through 

our award winning communication channels

•  Ensuring that our employees receive the necessary training to do their 

jobs through our Talent Academy Online

•  Growing our people through our industry leading 

Apprenticeship programme

•  Listening to our employees feedback and taking the necessary action

•  Value for money
•  Nutrition and 
healthy eating

•  Food and drink quality
•  Quality of service

•  Competitive pricing
•  Continual review of brands and drinks offer
•  Reduction in levels of salt, sugar and calories across our menus
•  Rigorous supplier selection and a team of Beer Quality Technicians
•  High standards of employee training

•  Employment
•  Being a good neighbour
•  Pub closures
•  Emissions

•  Flexible employment, locally, with training and opportunities to progress
•  We are respectful of our neighbours, ensuring our estate is 

well-maintained and operate opening times that minimise noise 
and disturbances

•  We offer a range of pub tenancy contracts to support our partners 

during challenging economic conditions

•  We operate our breweries in line with Environment Agency regulations

Our supplier partnerships are governed 
by our Supplier Charter and contractual 
arrangements. We carry out supplier audits 
and Modern Slavery questionnaires and 
meet regularly with our key suppliers to build 
long-term relationships.

•  Ethical trading
•  Ethical sourcing 
of ingredients 
and raw materials

•  Continuity of supply and 
contractual conditions

•  Our Procurement Policy governs how employees engage with suppliers 

and sets out protocols when tendering contracts

•  Our Supplier Charter sets out our expectations regarding the ethical 

supply of goods, which all our suppliers are measured against

•  We review supplier resilience and capacity to maintain supply should 

an unexpected event arise

Our investors

We engage with our investors throughout 
the year via roadshows, direct meetings, the 
AGM and the communication of our half-year 
and full-year results and quarterly updates. 
Our Annual Report and Accounts and website 
hold detailed information on our business, 
governance and corporate responsibility.

The environment

•  Market valuation
•  Review of Directors’ 
Remuneration Policy

•  Dividend policy

•  Communication about the drivers for value creation within the Group 

and the opportunities for improvement

•  Consultation with major shareholders and proxy advisory bodies 

on proposed changes to the Directors’ Remuneration Policy

•  Since 2009 return on capital has increased from 9.8% to 10.4%, in this 

reporting year, and we have paid £426.6 million in dividends

Our energy team aims to implement innovative 
solutions and technologies to improve energy 
performance across our business. We set 
and monitor emissions and waste recycling 
targets, working with our suppliers to ensure 
sustainability and the environment are 
key priorities.

•  Climate change
•  Fuel usage
•  Single-use plastics
•  Water usage

•  We have conducted an energy savings review across our entire estate to 

identify opportunities for significant energy use reduction

•  We have invested in more efficient vehicles in our commercial fleet and 
promote fuel-efficient driving practices. We are also rolling out electric 
car charging points across our estate

•  We are collaborating with suppliers to reduce the use of single-use plastics

The government

We engage with UK Government Public 
Health and support government initiatives such 
as Drinkaware. As a member of the BBPA we 
participate in government consultations.

•  Changing legislation
•  Employee awareness 
of our compliance 
obligations

•  Our Risk & Compliance Committee monitors emerging legislation
•  Training, policies and procedures to ensure compliance
•  Provision of confidential ‘Speak Up’ services to encourage an open 

and honest culture

•  Monitoring for any areas 

of non-compliance

Marston’s PLC Annual Report and Accounts 2019Strategic Report16

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 optimise their range to 
capitalise on the key macro trends 
and our beer portfolio covers a 
variety of styles and packaging 
formats to appeal to a broad 
range of drinkers.

Trends
•  Consumers are demanding memorable occasions 

Challenges
•  Providing compelling reasons to visit our pubs 

and experiences in our pubs and elsewhere.
•  Consumers continue to drink less overall but they 
are choosing better, more premium drinks and 
are prepared to spend more on these.

•  Products with heritage and provenance continue 
to grow as consumers are looking for authenticity.

•  Consumers continue to seek a healthy and 
balanced lifestyle which includes reducing 
alcohol consumption.

by offering better experiences than the competition. 
•  Guests continue to demand better quality at all levels 

of the market amidst tough competition.

•  Communicating our heritage and provenance in 

an emotive and engaging way.

•  Balancing health with an occasional treat and 

providing drinkers with attractive options if they choose 
to reduce their alcohol intake.

Eat
Our pubs offer something 
for everyone, from great 
value traditional favourites, 
to healthy options and 
emerging culinary trends.

Trends
•  Guests are looking to balance a healthier lifestyle 
with the occasional indulgence – especially when 
eating out. 

•  Delivering the basics brilliantly is a necessity 
for guests – hot food fast has never been 
more important.

•  Eating out has become less formal with 

guests looking for more interactive and social 
dining experiences.

•  An increasing demand for great value, yet high 

quality food that is customisable to an individual’s 
tastes and requirements. 

•  Guests are more conscious than ever about their 

impact on the environment, even when it comes to 
food, for example, animal welfare, food waste and 
plastic packaging.

Challenges
•  Developing dishes that appeal to a wide range 
of restrictive diets, understanding the preparation 
of those dishes within commercial kitchens where there 
is potential risk of cross-contamination.

•  Government focus on sugar and salt reduction targets, 

and potential legislation on calorie information 
on menus.

•  Consumption habits are changing, breakfast and 

afternoon occasions are increasing whilst traditional 
pub occasions of lunch and dinner are in decline.
•  Standing out in a saturated eating-out market whilst 
maintaining value for guests and profit margins.
•  With childhood obesity on the rise, ensuring our 

menus provide healthy and nutritious options whilst still 
appealing to children and facilitating frictionless family 
dining occasions.

Stay
Marston’s Inns provide great value 
accommodation in convenient 
locations adjacent to our pubs.

Trends
•  There is reduced demand in the market, in part 
caused by Brexit uncertainty. Whilst the London 
market was boosted by tourism, from sporting 
events such as the Cricket World Cup and Baseball 
League, the regional hotel market declined by 0.3% 
year-on-year (Alix Partners). 

•  Guest usage of budget hotels appears 

to be declining.

•  Younger people are particularly aware of the 
alternative choices and experiences available 
and seek the best value for money.

Challenges
•  The market is overcrowded with many new entrants 

offering B&B style models or capsule rooms.

•  The use of online travel agency bookings by guests 

is increasing each year.

•  Staying relevant by keeping up with technology 
developments and competing on a budget level 
with operators.

Marston’s PLC Annual Report and Accounts 201917

Opportunities
•  Deliver genuine engaging experiences in relaxed and 
enjoyable surroundings which separate our pubs from 
the rest of the market. Utilise cask as an experience that 
cannot be replicated at home.

•  Offer a breadth of range which encourages 

consumers to trade up into more premium brands 
and categories. Drive the development of new beer 
products in contemporary categories and respond 
to changes in consumer tastes.

Our response
•  We work to deliver a drinks range and drinks-led 
events that offer great experiences including beer, 
gin and whisky festivals and tastings.

•  We have increased the range and depth of 
premium brands in all categories in our pubs 
through the launch of premium cask and keg beers, 
including Hobgoblin IPA and Wainwright Altitude, 
and the increase of our portfolio of premium 
licensed brands in other categories.

•  Leverage our expertise in brewing built up over more 
than a century to ensure that we have the best offer 
in the market, delivered brilliantly.

•  Our compelling portfolio of brands provides 

authenticity to our range of drinks offered in each 
of our pubs.

•  Consumers are prepared to spend more on 

living healthier lives if it does not mean missing out 
on experience, premiumisation and authenticity.

•  Increasing the range of low and no-alcohol 
products, premium soft drinks under 100 
calories and no-sugar options in our pub. 
Development of Wainwright Gluten Free and 
Shipyard Low Tide (0.5% abv).

Premium beer sold 
(as a % of total beer sales)

.

8
0
8
%

.

7
7
6
%

.

7
2
4
%

19

18

171

1.  Includes beers acquired through the acquisition 
of Charles Wells Beer Business from June 2017.

Opportunities
•  Developing balanced menus which offer healthier 
options and indulgent treats to cater for varied 
demand from guests.

Our response
•  All menus feature a range of lower calorie dishes, 

healthy switches and a range of vegan and 
vegetarian dishes. 

•  Enhancing guest satisfaction through improved food 

•  All new products comply with the Government’s salt 

Eating-out sales growth

.

1
0
5
%

quality, presentation and speed of service.
•  Broadening the food offer to provide choices 
at breakfast and more informal snacking and 
grazing occasions.

•  Working closely with suppliers to deliver the best 
possible products at prices our guests are happy 
to pay.

and sugar targets.

•  We are reducing the complexity of food 

preparation in our kitchens to serve food more 
efficiently to our guests.

•  Our menus focus on delivering pub classics 

alongside more adventurous and specialist dishes, 
and emerging culinary trends.

•  All food suppliers are required to comply with high 
standards of animal welfare, where relevant, source 
locally and minimise food miles, minimise packaging 
in products and distribution and target the removal, 
reuse or recyclability of plastic packaging.

Opportunities
•  Online travel agencies give Marston’s exposure 

to a wider group of guests.

•  Use our pubs to more actively drive awareness 

and promotion of Inns.

•  Enhance the overall experience by highlighting 

the benefits of being part of a pub and all that that 
can bring in entertainment, food and drink choices.

•  Reinforce the ‘something for everyone’ message 
not only through our pubs, but with Inns too.

Our response
•  Full presence on the biggest online travel agency 
sites plus incentives to book direct for future visits, 
to maximise the best of both worlds.

•  Investment in more digital activity and advertising 
to target our pub guests and to raise awareness 
of Inns to prospective guests.

•  Measuring the guest experience by identifying any 
key needs that differ by age groups. This data will 
allow us to better identify our guests’ needs.

.

1
3
%

.

1
4
%

.

1
7
%

19

18

17

19

18

17

(
X
X
%
)
(
1
4
%

.

)

.

(
1
2
%

)

Marston’s

Market

Revenue per available room
(RevPAR)

£
3
8
1
8

.

£
3
8
9
9

.

£
3
7.
3
4

19

18

17

Marston’s PLC Annual Report and Accounts 2019Strategic Report 
18

Our Strategy

Our purpose is to build relationships, bring people together and 
create happy, memorable and meaningful experiences for our teams, 
our guests and our customers, every day.

Our Group strategy

1

2

Operating a high quality pub and rooms business 
offering great places to drink, eat and stay.

Operating a ‘best in class’ beer business with a wide 
range of premium and local brands and great service.

•  Maintaining a balanced pub portfolio across all segments 

of the market.

•  Targeted capital investment to improve pub values 

and premiumise the guest experience.

•  Operational investment to improve the execution of the offer.
•  Further investment in our technology and digital resources 

to improve the guest experience and operational efficiency.

•  Continue to exploit growth segments in the beer market.
•  Sustainable long-term growth of a local, national and global 

portfolio of brands.

•  Delivering a complete customer experience solution.
•  A world-class supply chain delivering the highest quality 

service at optimal cost.

See page 19 
for more information

See page 22 
for more information

Underpinned by our values and culture

The Marston’s Way
To achieve our purpose it’s important that we can run our business in an ethical and responsible manner, truly caring for the people and places we impact 
along the way. Our code of conduct, The Marston’s Way, directs and guides our people with the help and support they may need along with policies 
and other useful reference information.

Our Ways of Working
The success of our business depends on our Ways of Working (WoW), which are the behaviours we expect of our people. We are a people-powered 
business, so it is essential our people work together, care about each other, recognise a job well done and always strive to be the best.

WE ARE ONE TEAM
We are one Marston’s, one team 
– trusted to make the right decisions 
and play our part.

WE CARE
We care – we take time to listen, 
understand and do the right things 
for our customers and stakeholders.

WE CELEBRATE
We celebrate – when we do 
something really well, we shout 
about it and have fun celebrating.

WE DREAM BIG
We dream big – together we strive 
to make Marston’s ‘The Place to Be’ 
and always exceed expectations.

Marston’s PLC Annual Report and Accounts 201919

Progress to date
•  LFL sales growth of 0.8% in both wet-led and food pub segments
•  Average profit per pub in line with last year but increasing by 7% after 

the disposals announced in November 2019

A balanced pub portfolio operating across 
all segments of the market
We operate a predominately freehold pub estate that caters for a broad 
range of guests, with flexible operating models. This allows us to ensure 
we have the right consumer offer, accompanied by the most appropriate 
operating model, to maximise sales and profits for each individual pub, thus 
maximising long-term value.

Our pub business comprises the following:

Family pub-restaurants – our family pub-restaurants offer family dining 
and great value in a relaxed pub environment. We aim to retain strong 
pub values while reflecting modern tastes and trends in a fast moving 
and competitive market.

Community pubs – our community pubs are great ‘locals’ with a more 
traditional pub ambience in strong locations. The contribution of the licensee, 
together with strong community engagement, are critical to the success of 
these pubs with entertainment, team-led engagement and games often 
at the heart of the pub’s activities. Our community pubs 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.

Premium pubs and bars – our Pitcher & Piano bars and Revere bars 
and pubs offer premium food and drink in attractive, often iconic town centre 
and suburban locations.

Accommodation – we operate around 1,700 rooms across our business. 
We operate 30 stand-alone lodges adjacent to pubs together with 
integrated rooms within pubs ranging from rooms above pubs to boutique 
premium bedrooms.

New pub-
restaurants opened

New lodges opened

Wet-led pubs opened

8

2

15

Smart investment across the pub estate
Targeted capital investment is integral to improving the performance of 
our pub estate. An effective capital programme provides an enhanced 
environment for existing guests and is a catalyst to attracting new guests 
in a highly competitive market.

Priorities for 2019/20
•  Targeted smart investment to generate stronger, sustainable returns
•  Improving the guest experience
•  Investing in digital and technology enhancements

1. Operating a high 
quality pub and
rooms business
offering great 
places to drink, 
eat and stay.

We remain focused on emphasising the ‘pub’ brand. 
Regardless of the food mix and dining offer, our clear 
market positioning as a pub and bar operator reflects 
the enduring appeal of pubs compared to the more 
cyclical and fashion-led trends which influence the 
casual dining market. We believe we are in a unique 
position to further exploit this point of difference 
by linking our brewing heritage to the pub brand, 
an approach embedded throughout the business 
from head office through to our pub teams.

Destination 
and Premium

Taverns

The eating-out and drinking markets remain in growth overall. Marston’s 
drinks-led pubs achieved good growth in 2019 against very strong 
comparatives which included the benefits of a World Cup and hot summer. 
These strong performances reflect underlying strength in wet-led pubs, which 
continue to benefit from consumer trends including demand for engagement, 
experiences, and premiumisation.

Consistent with market trends, sales growth in food-led pubs has been 
more subdued. While there has been good growth at the premium end 
of the market within our Revere and Pitcher & Piano pub and bar portfolio, 
the value segment has been more challenging as a consequence of continued 
sector over-supply, and extensive price discounting. More positively, the last 
two years have seen some capacity reduction which has manifested itself 
in the form of some high profile CVAs, reductions in previously aggressive 
expansion plans and estate rationalisation from some of the larger scale 
operators. Marston’s Destination pub estate remains well placed to benefit 
from this reduced supply.

KPIs
•  LFL sales
•  Critical role turnover
•  Happiness score

Marston’s PLC Annual Report and Accounts 2019Strategic ReportIn 2019, we channelled much of our capital expenditure behind improving 
the pub values within our estate and premiumising the experience for our 
guests. The deployment of capital on a ‘little and often’ basis rather than 
significant expenditure on brand conversion generates stronger immediate 
and longer-term returns, and this will continue to be our operational 
approach in future years.

Our organic capital activity in 2019 was in two main areas:

Project Showman (£2.1 million): an investment programme specifically 
designed to enhance the presentation of the drinks offer to our 
guests. The initial signs are encouraging with a typical sales uplift 
of 6% post investment.

Project Hatton (£0.9 million): pub gardens are a critical part of the guest 
offer, typically doubling the size of the retail space on sunny days and 
today the vast majority of our pub portfolio benefits from outside space. 
Project Hatton is focused on improving the garden offer of the pub and 
during the year we completed 50 schemes delivering strong drinks sales 
growth. Early signs are encouraging, with a 4% improvement in sales trend 
in the final quarter of the year.

Our plans for 2020 are similar in nature. In addition, we have introduced 
a new maintenance cycle which ensures all of our pubs receive a five year 
cycle of investment to ensure that our entire pub portfolio is maintained in 
good condition and in a consistent manner.

Although our focus is now on debt reduction and on delivering organic 
growth from our existing estate, in 2019 we opened eight pub-restaurants 
and two lodges which are all trading well. In addition, we acquired 
15 well-located leasehold community pubs from Aprirose. We have 
completed the £4 million post-acquisition investment and initial trade is very 
encouraging; we are confident in achieving our expected return of 25% on 
this investment.

‘Guest at the Heart’ – improved operations 
underpinned by value, quality, and service 
In the current consumer environment, guest perception of value for money is 
key to long-term success. The market has been characterised by a consumer 
psyche of heavily ingrained discounting which, against a backdrop of 
cost headwinds, is unsustainable in our view. Our aim is to generate guest 
visits based on ‘best experience’ rather than ‘lowest price’. The initiatives 
described above are all intended to improve that guest experience from 
investing capital wisely but in addition we are focused on improving the 
execution of the offer as follows:

The Deers Rest, Romford

20

Our Strategy continued

Raising standards 

Two Area Operations Managers and their back-of-house teams 
have done a fantastic job at raising standards in our Community 
pubs with 95% of their sites achieving a five star food hygiene 
rating. Jolene Mohan and Natalie Jackson have both worked 
hard with the 27 sites to improve or maintain their standards, by 
building a competitive and fun culture among the pubs’ chefs and 
suggesting different approaches to deal with issues that can affect 
those standards.

They found that building a great rapport and creating a competitive 
atmosphere was key to this improvement. Feedback was delivered 
in a supportive way, using positive reinforcement to relay the key 
messages. As well as giving great feedback they also encouraged 
the chefs to offer that same supportive feedback to their teammates. 

Jolene and Natalie are now working in other parts of the business, 
to further improve EHO scores, where their approach to raising 
standards for those pubs remains the same.

Inspiring chefs 

Cori Mead has more than 20 years of experience in pub kitchens and 
has honed his skills in a range of our pub formats over the last 11 years. 
Since winning our ‘Chef of the Year’ competition in 2017, Cori has 
worked his way up to the role of Support Chef across one of our 
pub formats, Accent. This is a new role that allows Cori the opportunity 
to inspire teammates with his talent and passion for food. 

In his new role, Cori splits his time between 17 Accent pubs, helping 
kitchen teams deliver seasonal dishes using fresh ingredients. He works 
closely with other chefs and our Menu Development team to make sure 
the best quality food is being served.

This role has helped create a good working relationship with our chefs 
across the whole pub business so that they can easily feedback any 
issues and collaborate on any new ideas.

Marston’s PLC Annual Report and Accounts 201921

Improved operational effectiveness
•  We have combined the former Destination and Premium and Taverns 

businesses under one umbrella, Marston’s Pubs & Bars, to facilitate clearer 
direction and cultural identity in our pub teams.

•  We have reorganised the estate along geographical lines to allow Area 
Operations Managers to spend more time in their pubs, working closely 
with pub staff.

•  In 2019, pub audit scores continued to show improvement and EHO 

scores have improved to an average of 4.54. We are targeting further 
improvements, having recruited a team of food safety advisers, and 
replaced our health and safety auditors to drive further change.

Investment in pub teams
•  We invest significantly in training and development of our pub teams at 
every level and plan to invest a further £2 million in this regard in 2020; 
the Marston’s Talent Academy offers in-depth face-to-face and online 
training, and was a factor in our winning The Caterer’s Apprenticeship 
Employer of The Year Award in 2019. Reduced staff turnover in key roles 
is a priority for 2020 and we are aiming to further improve skill levels in 
our kitchens.

•  We have introduced new bonus schemes for pub management staff with 
a notably increased emphasis on guest satisfaction ratings and exemplary 
food hygiene standards.

Improved guest offer and experience
•  Reduced complexity: recent menu launches across the business have been 
designed to eliminate unnecessary ingredient and recipe duplication. 
This will benefit our guests through clearer menus and reduce wastage.

•  Premiumisation: the trend towards more premium brands in drinks 
continues across all categories. We will target additional portfolio 
enhancement to further leverage this trend.

•  Health: we were early to market in introducing an award-winning vegan 
menu in 2018, and the ‘plant burger’ in October of that year. This trend 
towards health awareness and wellness continues in food and drink; 
we have improved our already strong range of low and no-alcohol beers 
by introducing Shipyard Low Tide, a 0.5% abv pale ale.

•  We have replaced our external guest feedback provider with the 
objective of increasing the quality of information received, as well 
as improving the response rate.

Digital, technology and data development
Our plans to further improve our technology and digital presence to the 
benefit of guests and to increase operational efficiency are in several areas:

Paisley Pear, Brackley

Green thinking

In 2018, we announced a partnership with rapid electric vehicle (EV) 
charging network Engenie to become the UK’s first pub company 
to roll out rapid chargers across our sites nationwide. As an early 
adopter of EV chargers we are able to secure electric grid capacity, 
future-proof our sites and attract the fast-growing EV population.

We have committed to installing rapid chargers at 200 sites by 
the end of 2020, with an interim target of 80 sites by the end of 
December 2019. The chargers are powered by 100% renewable 
energy with up to three cars able to charge at any one time. 
The rapid chargers can charge an EV with around 80–100 miles 
capacity in approximately 30 minutes. The charging dwell time fits 
with our operating model, enabling drivers to ‘top up’ while using 
the pub’s facilities. 

To date, 25 sites are equipped with a total of 39 charge points. 
Usage is in line with the national average and we have seen positive 
public and media reaction to the charging experience, locations and 
quality of food and service in our pubs. Our chargers have powered 
150,000 EV miles saving 29.2 tonnes of CO2, the equivalent of 
175 trees, since the installation programme began.

The digital and systems development described here provides us with 
a significant amount of data about our guests’ behaviours and tastes. 

•  We will invest an additional £1 million into a new and innovative digital 
marketing programme in 2020 targeted at improving the social media 
relationship between our pubs and local guests. Social media is a key 
mechanism to build traffic in pubs, facilitating communication about 
events, activities and promotions.

To convert this data into information that can be acted upon, our in-house 
data team has developed new dashboards to assist both our operational 
and commercial teams in identifying and resolving problems quickly. 
Looking forward we will invest further in this team to ensure we can respond 
quickly to changing consumer needs.

•  As part of an ongoing plan to simplify the customer journey in 2019 

we introduced a new online table booking system ‘Book Your Table’. 
In 2020, we will introduce more flexible payment facilities enabling guests 
to pay from mobile devices, together with a ‘digital tab service’ which will 
allow for tabs to be opened securely.

•  The implementation of our new EPOS system is substantially complete, 
and will conclude in 2020. We are already seeing clear operational 
benefits both from a guest facing perspective and efficiency improvements 
in our back-of-house operations. 

•  In 2020, we are rolling out a new in-house developed labour scheduling 

system to facilitate improved labour allocation.

Marston’s PLC Annual Report and Accounts 2019Strategic Report22

Our Strategy continued

2. Operating a 
‘best in class’ beer 
business with 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 with premium brands that are 
loved and demanded by customers and consumers. 
Its strategy is based around five strategic pillars of 
beer and brands, customers and consumers, supply 
chain, service and people that provide a framework 
for its forward-looking approach.

Brewing

Marston’s brewing business achieved good growth in 2019 against very 
strong comparatives which included the benefits of a World Cup and hot 
summer. This strong performance reflects underlying strength in wet-led pubs 
and the wide range of consumer choice from our owned and licensed 
brands within our extensive beer portfolio.

KPIs
•  Total own ale – market share
•  World beer – market share growth
•  On time in full (retail and logistics)

Progress to date
•  Total volume up 1%
•  New 15 year licence agreement with Shipyard
•  2.5 million composite barrels of beer delivered to one in four UK pubs
•  Best Ale Supplier – Readers Choice Awards 2019
•  Hobgoblin IPA, World’s Best English Style IPA – World Beer Awards
•  Estrella Damm, Best Beer Brand – The Restaurant Magazines Readers 

Choice Awards

Priorities for 2019/20
•  Continue growth and distribution of our core own-brewed brands
•  Continue insight-driven innovation at an even greater pace
•  Build on our growth in licensed world beers
•  Focus on class-leading customer support and service

Exploiting the growth segments in the beer market
There are positive trends driven by consumers seeking a wider choice 
of beers with local provenance and taste, particularly within the craft 
beer segment where Marston’s excels. IPAs, including US craft beers and 
craft keg beers, are increasing in popularity and non-alcoholic beers are 
in significant growth from a small base. 

The off-trade continues to grow in both absolute terms and in share 
of the total drinks market. The strongest growth is in premium bottled ale 
where we are market leader, and canned craft beer.

Our strategy has anticipated many of these trends. In the last ten years, 
we have achieved a fourfold increase in turnover and profits have doubled 
as we have increased our market share. Our market position continues to 
strengthen with a 14% share of the total ale market, 24% of the premium ale 
market in the on-trade and 25% of the premium ale market in the off-trade.

Sustainable long-term growth of local, national 
and global portfolio of brands
Our ale portfolio has been enhanced significantly through acquisitions. 
Wainwright, acquired in 2015, is our fastest growing cask ale brand and 
in 2017 the acquisition of Bombardier, Young’s and Courage provided 
distribution opportunities in London and the south of England, as did 
McEwan’s in Scotland. These acquisitions enhanced an already strong 
and unrivalled core brand range including Marston’s, Banks’s, Jennings, 
Wychwood and Ringwood.

Hobgoblin remains our biggest ale brand and the ‘unofficial Beer of 
Halloween’. We continue to evolve the brand with the introduction of 
Hobgoblin IPA which was awarded the ‘Best IPA in the World’ in the 2018 
World Beer Awards. We achieved a total of ten Gold, Silver or Bronze 
medals in 2019, including 61 Deep winning the World Beer Award for 
golden beers.

In addition to our ale portfolio, Marston’s has exclusive UK licences for USA 
craft beers including Shipyard and Founders; world lagers including Estrella 
Damm, Warsteiner and Kirin; and Kingstone Press Cider. We have renewed 
the Shipyard licence for a further 15 years. These brands have been 
important growth drivers and have supported our geographical expansion 
in the independent free trade.

The Boat Race

This year, one of our largest growing beer brands, Wainwright, 
became The Official Beer of the Boat Race, a four mile battle along 
the River Thames between Oxford and Cambridge Universities. 

Our investment in a three year agreement is an important element of 
our plan to develop national awareness of Wainwright beer. From its 
historic heartland in the Lakes, Wainwright has continued to expand its 
geographic reach and it is currently the UK’s No.1 Golden Cask Ale. 

The Boat Race is a popular spectator event watched by millions of 
TV viewers and several hundred thousand visitors who line the banks 
of the Thames. The Wainwright Fan Park experience and wider brand 
activation enables us to promote our ‘Find Your Mountain’ brand 
campaign – engaging our customers with on-pack and in-outlet 
promotions – that celebrate this partnership and has increased our 
trade distribution.

Marston’s PLC Annual Report and Accounts 201923

Our brands are also demanded globally, with exports now accounting 
for around 10% of our own-brewed beer sales. We export 19 brands 
to 61 countries, including our six key markets of Russia, Canada, France, 
Italy, Germany and the USA. 

Our marketing strategy is underpinned by a combination of both national 
and local marketing activity, with a focus on digital, print media and sports 
sponsorship. At a local level we have long standing sponsorships at the 
New Forest Show, Henley Regatta and Keswick Jazz Festival, and we 
operate highly acclaimed brewery tours across our breweries.

Sports sponsorship includes a recent five year extension to the beer supply 
into Lord’s Cricket Ground, and Wainwright sponsorship of the 2019 Oxford 
and Cambridge University Boat Race, both of which provide us with a 
platform to showcase our brands in both London and on a national basis.

Recognised as best in class by our customers, 
delivering a complete customer experience solution
We pride ourselves that our customers in both the on-trade and off-trade 
value our market leading position and insight. We leverage our knowledge 
of the beer market with our customers to improve their offers, receiving 
supplier awards from several of our major customers. Our annual On-
Trade and Off-Trade Beer Reports are valued by our customers and the 
industry generally.

This strong foundation in brewing and logistics excellence, together with 
sensible investment in our business makes us well placed to participate 
in continued consolidation of the UK beer supply chain.

New 15 year licence agreement signed 
with Shipyard 

We have reached a new long-term trade agreement with 
Shipyard Brewing Co. who are based in Portland, Maine. 
The new multi-million pound agreement for 15 years renews the 
partnership between the two companies and extends it until 2034. 
This next phase of our partnership will cover exciting new product 
development plans for 2020 and beyond. The collaboration, which 
already has a 12-year history, has gone from strength to strength as 
the popularity of USA styled craft beers has grown in the UK. 

Shipyard American Pale Ale, the first beer to be brewed solely in the 
UK for Shipyard, was permanently available in 2013 and has gone 
on to be the UK’s biggest selling craft keg beer and Shipyard IPA 
continues to grow in the off-trade. In June 2019, Marston’s launched 
Low Tide, Shipyard’s first low-alcohol alternative, a 0.5% abv pale 
ale, into the UK market. This has improved our already strong range 
of low and no-alcohol beers.

Deliver to UK pubs

1 in 4

World class supply chain delivering highest quality 
at optimal cost in brewing and logistics
Our beer business provides brewing, packaging and distribution services 
for a wide range of customers, in addition to our own pubs. Three of our 
six breweries are British Retail Consortium ‘A’ rated or above. We now 
distribute to around a quarter of the 46,000 on-trade outlets in the UK and 
we recently opened a new distribution facility in Thurrock, in addition to the 
11 depots we have nationwide, to further enhance our distribution capability.

In addition to the new business generated in 2018 as distributor to Punch, 
Hawthorn and Brakspear, we have secured additional distribution 
agreements with New River, Trust Inns and Young’s.

The Marston’s brewery in Burton-upon-Trent is our centre of excellence 
for packaging both bottled and canned beers. The completion of the 
new canning line in 2018 has further improved our canning efficiency and 
opens up more customer opportunities in addition to bottling. We currently 
package a significant portion of the UK premium bottled ale market.

Supply chain capability increasing 
business opportunities 

During the year, we were awarded retail distribution contracts with 
an additional three national pub companies: Young’s, Trust Inns and 
New River Retail, each of which had fully transitioned into our supply 
chain by March 2019. Ongoing investment in our supply chain 
infrastructure and IT systems has increased our capacity to service 
the additional volume from these agreements; we are now delivering 
to around 1,000 more pubs across the country.

Competing against major national and international drinks logistics 
companies, we secured each contract as a result of our industry-
leading customer service, supply chain efficiency and our extensive 
range of beers, cider, wines, spirits and minerals. Increasing our 
nationwide logistics capability enables our customers to offer more 
of our category-leading own and world beer brands to consumers.

Marston’s PLC Annual Report and Accounts 2019Strategic Report24

Our Key Performance Indicators

We have reviewed our financial and non-financial KPIs during the 
year, introducing new measures to help us stay focused on our strategic 
objectives and align remuneration to performance.

Financial

Underlying earnings 
per share (EPS)
Why we have chosen this KPI
A widely used profitability 
and valuation measure.

How it links to:
Strategy – an important indicator of profitability
Risk – market/operational, business continuity 
and political
Remuneration – LTIP measure

1
3
9
p

.

1
4
2
p

.

1
3
5
p

.

Net cash flow (NCF) 
Why we have chosen this KPI
Our objective is to reduce borrowings by at least 
£200 million by 2023. This will be achieved 
through a combination of earnings growth, 
reduced capital expenditure and increased 
disposal activity. The most appropriate measure 
of our progress in achieving this target is through 
the NCF measure.

How it links to:
Strategy – a measure to 
track cash generated and 
available to reduce debt
Risk – business continuity, 
political and 
financial covenants
Remuneration – LTIP measure

£
(
6
1
2
)
m

.

£
(
5
7
4
)
m

.

£
(
1
0
5
)
m

.

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 28.

How it links to:
Strategy – improving the returns from our assets 
is an indicator of the quality of our estate
Risk – market/operational, 
and business continuity
Remuneration – impact  
on earnings and profit

1
0
7
%

.

.

.

1
0
4
%

1
0
3
%

19
19

18

17

19

18

17

19

18

17

Pubs and bars

Like-for-like sales
Why we have chosen this KPI
The best indicator of our pub performance 
against the market (based on the Coffer Peach 
Business Tracker).

Critical role turnover
Why we have chosen this KPI
Our General Managers and Head Chefs 
have the biggest impact and influence over 
pub performance.

How it links to:
Strategy – measures organic sales growth 
in our pubs reflecting the quality of our offer
Risk – market/operational business continuity 
and political
Remuneration – impact 
on earnings and profit

.

1
1
%

.

0
9
%

.

0
6
%

How it links to:
Strategy – our competitive advantage comes 
from our people
Risk – our people, food safety, health and safety
Remuneration – indirect 
impact on earnings and profit

.

7
2
2
%

.

6
4
7
%

.

5
9
3
%

.

3
2
9
%

.

2
8
3
%

.

2
6
3
%

General 
Manager

19

18

17

Head Chef

19

18

17

19

18

17

Happiness score
Why we have chosen this KPI
The barometer by which we measure our 
guests’ satisfaction.

How it links to:
Strategy – vital for growth and essential 
for retaining guests
Risk – market/operational, food safety, 
health and safety, our people
Remuneration – impact on earnings and profit

In October 2019, we launched a new guest 
satisfaction survey to accurately record guest 
satisfaction at all our pubs. We will start 
reporting on this from next year.

Marston’s PLC Annual Report and Accounts 201925

Two key components to our strategy:
1
2   Operating a ‘best in class’ beer business with a wide range of premium and local brands and great service.

  Operating a high quality pubs and rooms business offering great places to drink, eat and stay.

Beer business∆

Total own ale – market share
Why we have chosen this KPI
Key indicator of the success of our brands.

How it links to:
Strategy – a measure of the success 
of our own brands
Risk – business continuity, our people
Remuneration – impact on earnings and profit

World beers – market share 
growth
Why we have chosen this KPI
Reflects the volume of sales of our world beers 
within the Premium lager category in the on-trade 
and off-trade.

How it links to:
Strategy – a measure of our growth in this market
Risk – business continuity, political
Remuneration – impact on earnings and profit

On time in full (retail and logistics)
Why we have chosen this KPI
Demonstrates our focus in excelling 
at customer service.

How it links to:
Strategy – a measure of the quality 
of our service offer
Risk – business continuity, health and safety, 
information technology, our people
Remuneration – impact on earnings and profit

.

1
4
2
%

.

1
4
0
%

.

2
6
%

.

2
5
%

.

9
4
6
%

.

9
5
5
%

.

9
3
6
%

.

9
5
4
%

Source: BBPA Market Share Report 2019

19

18

Source: BBPA Market Share Report 2019

19

18

Retail

Primary

19

18

∆ 

Owing to the acquisition of CWBB in 2017, and other major distribution contracts, it has not been possible to provide meaningful comparatives for 2017.

Group

Employee engagement
Why we have chosen this KPI
Great customer service and improved business 
performance comes through engaged and 
enabled employees.

How it links to:
Strategy – a great customer experience 
is reliant on the quality of our people
Risk – our people, food safety, health and safety
Remuneration – impact on earnings and profit

6
8

6
3

7
3

6
8

6
9

6
5

7
6

6
5

FTSE4Good ESG score
Why we have chosen this KPI
Consolidated external metric 
of key sustainability factors.

How it links to:
Strategy – important to the long-term 
sustainable success of our business
Risk – business continuity, food safety, health and 
safety, our people
Remuneration – indirect impact on earnings 
and profit

2
7

.

2
5

.

2
4

.

See page 18 
for more on Our Strategy

See page 31 
for more on Our Principal Risks

See page 54 
for our Remuneration Report

Engagement

Enablement

Benchmark

19

18*

17

19

18*

17

19

18

17

* 

In 2018, we decided not to undertake an employee engagement 
survey as we wanted 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.

Marston’s PLC Annual Report and Accounts 2019Strategic Report26

Group Operating and Financial Review

swap arrangements as a consequence of well-publicised lower gilt yields. 
Non-underlying items before tax were £121 million, of which £112 million 
were non-cash items, described in further detail below.

Operating cash flow of £195.6 million was £13.2 million higher than last 
year. The increase principally reflects improvements in working capital in 
the period.

Net debt at the period end was £1,399 million (2018: £1,386 million) 
reflecting investment in new sites during the course of the year. Fixed charge 
cover remains strong at 2.5 times, in line with last year. Cash Return on Cash 
Capital Employed (CROCCE) was 10.4% up 0.1% versus 2018.

The proposed final dividend of 4.8 pence per share provides a 
total dividend for the year of 7.5 pence per share, in line with 2018. 
Dividend cover is 1.8 times. In the medium term, our dividend policy remains 
to maintain cover of around 2 times.

Destination and Premium
Total revenue increased by 2.1% to £460.1 million reflecting the 
performance of our new-build pub-restaurants and growth in like-for-like 
sales. Underlying operating profit was £87.1 million (2018: £89.4 million). 
Profit per pub is 4% down compared to last year.

Total like-for-like sales were 0.1% ahead of last year, principally reflecting 
positive drink and accommodation sales, offset by weaker food sales. 

Reported underlying operating margin of 18.9% is slightly below last year, 
reflecting increased margin investment and cost increases in labour, business 
rates and energy costs.

Taverns
Total revenue increased by 3.9% to £324.1 million, principally reflecting 
like-for-like sales growth in the year in our managed and franchised pubs. 
Operating profit was up 0.2% on last year reflecting growth in the core 
business offset by disposals and £0.7 million of opening costs for the new 
pub acquisitions described above. Profit per pub was up 2% on last year.

In our managed and franchised pubs, like-for-like sales were up 1.9%. 

Underlying operating margin was 1.0% below last year at 26.6%, reflecting 
cost increases, the continued impact of franchise conversions, and increased 
rent and opening costs from the Aprirose acquisition.

Brewing
Total revenue increased by 3.1% to £389.3 million, principally reflecting 
volume growth in our core business and the benefits of the new distribution 
contracts in the year. Underlying operating profit increased by 1.9% to 
£32.6 million.

Underlying operating margin of 8.4% was broadly in line with last year.

“ Our debt reduction 
strategy is underpinned 
by clear capex reduction
and disposal plans.”

Group performance
Total underlying revenue increased by 2.9%. This reflected the positive 
impact of new openings and pub acquisitions and like-for-like sales growth 
in our pubs, and growth in brewing helped by new distribution contracts 
with New River, Trust Inns and Young’s.

Underlying EBITDA of £221.9 million (2018: £222.6 million) was 
maintained compared to last year and operating profit was £178.7 million 
(2018: £182.5 million). Operating profit per pub was in line with last year; 
EBITDAR per pub (adjusting for sale and leaseback agreements) increased 
by 1%. 

Group operating margins were 0.8% behind last year. Cost challenges 
remain a significant issue for the sector, particularly people and property 
costs. In addition, operating margin was impacted by converting pubs 
to franchise style agreements and the impact of the acquisition of 
15 community pubs in the first half-year.

Underlying profit before tax was £101.0 million (2018: £104.0 million). 
Basic underlying earnings per share for the period were 13.5 pence 
per share (2018: 13.9 pence per share).

On a statutory basis, the loss before tax was £20.0 million 
(2018: £54.3 million profit) and the loss per share was 2.8 pence per share 
(2018: 7.1 pence per share profit). The year-on-year change principally 
reflects a non-cash impairment charge from the revaluation of certain 
properties and the adverse impact on the mark-to-market of our interest rate

Destination and Premium
Taverns
Brewing
Group Services
Group

Underlying
revenue

Underlying
operating profit

Margin

 2019 
£m

460.1
324.1
389.3
–
1,173.5

 2018 
£m

450.7
312.0
377.7
–
1,140.4

 2019 
£m

87.1
86.3
32.6
 (27.3)
178.7

 2018 
£m

89.4
86.1
 32.0
(25.0)
182.5

 2019 
%

18.9
26.6
 8.4
(2.3)
15.2

 2018 
%

19.8
27.6
 8.5
(2.2)
16.0

Marston’s PLC Annual Report and Accounts 2019 
27

Future pub reporting
Following a reorganisation of the pub operational and commercial 
structure, the business is no longer operated as Destination and 
Premium and Taverns segments. As a consequence of this, from 
financial year 2020 we will be reporting our pub business under a 
single ‘Pubs and Bars’ segment to reflect this change. Strategically this 
enables us to operate the pub estate in a more flexible manner, 
permitting quicker changes in format where required. In addition, our 
operational structure is now more geographically, rather than format 
aligned, enabling area managers to focus on local competition across 
all pub types.

Group Services
Central costs as a proportion of turnover were 0.1% higher than in 2018. 
Absolute costs increased reflecting inflationary pay increases, the impact 
of both the apprenticeship and pub code levies, and higher training and 
IT costs.

Taxation
The underlying rate of taxation of 15.2% in 2019 (2018: 15.5%) was 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 
property is offset by previously unrecognised indexation.

Total tax contribution

£528.8m

Duty

VAT

£256.1m

£168.1m

Employee payroll

£39.8m

Business rates

£32.9m

Employee payroll taxes

£17.5m

Corporation tax

Other

Total

£9.0m

£5.4m

£528.8m

Pensions 
The deficit on our final salary scheme was £36.4 million at 28 September 
2019 which compares to the £15.6 million surplus at last year end. 
This movement is principally due to the increase in liabilities as a 
consequence of the significant decrease in corporate bond yields 
in the period.

Non-underlying items
Non-underlying items before taxation were £121 million, of which 
£112 million were non-cash items, consisting of a £72.2 million charge 
to operating profit and a £48.8 million charge to finance costs. A net 
non-underlying tax credit of £17.4 million has also been recognised.

•  A write-off of acquisition and development costs of £9.9 million in 

respect of properties that will no longer be purchased/developed and 
£3.9 million of old EPOS equipment due to the rollout of the new system 
across the estate. 

•  A charge of £2.3 million in respect of the change in the rate assumptions 

used in calculating our onerous lease provisions.

•  Reorganisation and integration costs of £8.1 million, principally from 

the integration of the Charles Wells beer business – this Charles Wells 
integration process is now complete and no further costs are expected 
to be incurred.

•  A pension scheme past service cost of £4.6 million in respect 

of Guaranteed Minimum Pension equalisation.

Capital expenditure and disposals
Capital expenditure was £133.8 million in the year (2018: £162.7 million) 
including £50 million on new pubs. We expect that capital expenditure 
will be around £90–95 million in 2020.

Cash proceeds of £49.8 million have been received from the sale 
of pubs and other assets, including £35 million of leasing transactions. 
Disposal proceeds of around £70 million are anticipated in 2020, 
an increase in the guidance provided at the Interim Results in May, 
and a targeted net cash inflow of £45–55 million over the next year.

Financing and financial strategy
Our debt structure is long term, secured on our 91% freehold estate, with 
interest rate exposure hedged using interest rate swaps. 

The Group has a £360 million bank facility to March 2024. This facility, 
together with a long-term securitisation of approximately £745 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 £358 million as at 28 September 2019. 
This financing is a form of sale and leaseback agreement whereby the 
freehold reverts to the Group at the end of the term at nil cost, consistent with 
our preference for predominantly freehold asset tenure. The agreements 
range from 35 to 40 years and provide the Group with an extended debt 
maturity profile at attractive rates of interest. Unlike a traditional sale and 
leaseback (before IFRS16), the associated liability is recognised as debt 
on the balance sheet due to the reversion of the freehold.

Operating cash flow of £195.6 million is £13.2 million ahead of last year.

For the period ended 28 September 2019, the ratio of net debt before lease 
financing to underlying EBITDA was 4.7 times (2018: 4.6 times). It remains 
our intention to reduce this ratio over time.

During the year, we set out a commitment targeting a £0.2 billion reduction 
in net debt by 2023. Thereafter, we expect to operate a business that 
generates consistent net cashflow, after dividends, of at least £50 million per 
annum. The achievement of this will provide us with the optionality to continue 
to reduce the Group’s overall levels of debt or, alternatively, inject additional 
growth investment into the business.

Items recognised in the year included the following:

As a consequence of this strategy, our focus is on the following:

•  The impairment of underperforming Destination and Premium 

properties in the period, which resulted in a £43.4 million charge 
to the income statement.

•  A non-cash £48.7 million net loss reflecting interest rate swap valuation 
movements. Most of these movements would historically have been 
recognised in the hedging reserve – clearly any increase in gilt yields 
would result in a positive impact on the income statement.

•  Continued deferral of new-build pub investment for the time being.
•  Increased focus on improving performance and returns from the 

existing pub and beer business through the reallocation of some capital 
expenditure away from new pub investment to the operational initiatives 
described on pages 19 to 23.

Marston’s PLC Annual Report and Accounts 2019Strategic Report28

Group Operating and Financial Review continued

•  The disposal of £150 million of certain non-core assets in 2020–23.
•  Through improvements relating to the final salary pension scheme (which 
has a modest deficit that is expected to reduce in the next two years 
subject to gilt yields), and the costs of servicing the securitised debt.

Our progress to date towards these targets is encouraging, we are currently 
ahead of schedule in our overall debt reduction plans and we are reviewing 
the extent to which we can accelerate the achievement of this.

Reduction in interest payments: we have successfully reprofiled the swap 
interest payments within the securitisation. This benefit has been slightly offset 
by an increase in the cost of the liquidity facility. We expect the net reduction 
in interest payments to contribute to at least £3 million of interest savings per 
annum for the next five years compared to our original plans. Importantly, 
this reprofiling has not incurred any swap break costs.

Capital expenditure reduction: having reduced capital expenditure by 
around £30 million in 2019, we are targeting a further £40 million reduction 
in 2020 principally reflecting lower levels of new-build expenditure. 
Our organic capital expenditure will be £80–90 million reflecting a 
commitment to improving the quality of our existing pub estate and 
generating further growth from this portfolio. We expect capital expenditure 
to reduce by a further £10–15 million in 2021.

Disposals: our guidance for 2020 is at least £70 million and we are 
targeting at least £150 million of disposals in the period 2020–23 in total.

Maintain dividend: the Board is committed to maintaining the dividend 
at the current level during this period of debt reduction focus.

Lease accounting
The Group will adopt IFRS 16 ‘Leases’ in its financial statements from the start 
of the new financial year. 

The main effect of this new accounting standard is to bring all leases ‘on 
balance sheet’ for lessees. This means that the Group will have to recognise 
a lease liability within borrowings in respect of the majority of its existing 
operating leases along with either a right-of-use asset in property, plant and 
equipment or a finance lease debtor (for some sublet properties). The rental 
payments/receipts currently charged to the income statement will be treated 
as repayments of the lease liability/finance lease debtor and instead 
the income statement will include depreciation of the right-of-use asset 
and interest on the lease liability/finance lease debtor.

The Group will follow the modified retrospective approach in IFRS 16 and 
will also take the option to measure the right-of-use assets as if IFRS 16 had 
always applied but using the Group’s incremental borrowing rate at the date 
of initial application.

It is expected that upon adopting IFRS 16 and making related accounting 
policy changes on 29 September 2019, the Group’s borrowings will 
increase by around £285–310 million and net assets will reduce by around 
£45–55 million.

Assuming there are no significant changes to the portfolio of leases held 
by the Group as at 29 September 2019, it is expected that profit after tax 
for the period ended 3 October 2020 will be around £3–7 million lower. 
There will be no impact on the overall net cash flow of the Group.

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*
Cash capital employed
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

*Creditors comprise trade and other payables, other non-current liabilities and provisions for other liabilities and charges.

Andrew Andrea
Chief Financial and Corporate Development Officer

Balance
£m

Depreciation
£m

Revaluation
£m

230.3
88.5
2,350.4
9.3

43.6
1.7
90.9

(273.2)
2,541.5

6.3
184.4

(598.9)

190.7

(598.9)

2019

Adjusted
£m

230.3
94.8
1,935.9
9.3

43.6
1.7
90.9

(273.2)
2,133.3
221.9
10.4%

2019
£m

195.6
0.5
(74.4)
(1.1)
–
120.6

Marston’s PLC Annual Report and Accounts 2019Non-Financial Information Statement

29

We aim to comply with the Non-Financial Reporting requirements as set 
out in sections 414CA and 414CB of the Companies Act 2006.

To summarise our compliance with the Non-Financial Reporting requirements 
on environmental, employee and social matters we have set out below the 
Group’s approach, related policies and monitoring in the five areas covered 
by the requirements, together with signposts to other relevant sections of the 
Annual Report and Accounts or our corporate website.

Environment
We continue to strive towards reducing our environmental impact and 
take our responsibilities very seriously. We continually look for innovative 
and technological solutions to reduce the use of resources, minimise waste 
and increase efficiency, and we set targets aimed at achieving continual 
improvements. Our Environmental policy sets out the Group’s approach to 
reducing our impact and all our employees play a part in this. Every year 
we engage the services of an energy professional to measure our emissions 
and highlight areas of improvement. We have been encouraged to see 
that this year’s total CO2 emissions have decreased despite an increase 
in revenue. We are required to target and monitor our environmental 
performance across a number of regulatory schemes including our brewing 
industry climate change agreement, EU Emissions Trading Scheme and the 
Streamlined Energy and Carbon Reporting regulation. 

•  Environmental policy and greenhouse gas emissions – page 74
•  Targets and performance – Corporate Responsibility report – page 37
•  Environmental report – www.marstons.co.uk/responsibility

Employees
Through our people, our purpose is to operate high quality pubs and lodges 
and a ‘best in class’ beer business. Our ambition is to enable and inspire our 
people to be their best. 

We aim to attract and retain the very best talent across all levels. We offer 
learning, development and career opportunities for all who play a part in 
achieving our vision – an aspiration we can only realise through our people.

We want Marston’s to be a great place to work for all our people, creating 
happy, memorable and meaningful experiences to make our business 
successful. We aim to provide a safe working environment and our code 
of conduct, The Marston’s Way, sets out our expectations of employees 
to ensure we run our business in an ethical and responsible manner.

•  Business Model – People resource – page 12
•  Equal Opportunities policy – www.marstons.co.uk/responsibility
•  Gender Pay Gap report – www.marstons.co.uk/responsibility
•  Health and Safety policy – www.marstons.co.uk/responsibility
•  People risk – page 33
•  Health and Safety risk – page 32
•  Engagement and enablement – page 25

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 in beer and pubs. We create 
employment and engagement in our local communities and actively involve 
ourselves in pub community events and charitable causes, matching fund 
raising through our charity schemes. Our breweries all hold open events, 
provide tours and retail shops as a way of engaging and communicating

with their local community and our brewery teams get involved in local 
events and fundraising. 

We recognise the importance of helping people to make informed decisions 
regarding alcohol consumption, increasing awareness of harmful levels 
and providing access to factual advice. We do this by being a sponsor 
of Drinkaware, an independent UK-wide alcohol education charity, 
and promoting them on our website. 

•  Business Model – page 8
•  Corporate Responsibility report – page 37
•  Alcohol awareness – www.marstons.co.uk/responsibility 
•  Information on charitable causes we have supported is available 

at www.marstons.co.uk/responsibility

Human rights
We are committed to respecting and upholding the human rights of all 
people and we recognise the rights of any person connected with our 
business. 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 that 
we apply to ourselves and we conduct checks, audits, questionnaires and 
ethical searches as part of our new supplier due diligence. Our Human 
Rights policy is communicated to all our employees and is linked to our 
code of conduct, The Marston’s Way. We have become full members of 
SEDEX this year, allowing us to increase the depth of our ethical searches 
on suppliers and the accountability of our suppliers in fighting modern 
slavery. A secure digital environment is essential to safeguard personal data 
and we continually test the robustness of our systems including the threat from 
a cyber attack.

•  Human Rights policy
•  Group purchasing policy 
•  Supplier charter 
•  Modern Slavery Statement
•  Data privacy policy 
•  IT risk – page 33

Policies relating to Human Rights are available at www.marstons.co.uk/
responsibility linked to our code of conduct.

Anti-corruption and anti-bribery
Marston’s is committed to conducting its operations in a fair and ethical 
manner, and adopts a zero tolerance to any form of bribery or corruption 
from its employees, suppliers or any other parties. We operate a Speakup 
line and email address to facilitate reports from our employees who wish 
to raise issues anonymously. Our systems allow visibility of disclosure by 
line management and the Board, who monitor reports regularly, and our 
policies are linked to our code of conduct found at www.marstons.co.uk/
responsibility. 

•  Anti-bribery and anti-corruption policy
•  Corporate Hospitality policy
•  Fraud policy

Marston’s PLC Annual Report and Accounts 2019Strategic Report30

Risk and Risk Management

Keeping risk management
at the heart of our business

The Board and Audit Committee recognise the importance of sound risk 
management to the achievement of our strategic objectives. Keeping risk 
management integral to the operation of the Group is a priority, requiring a 
continuous scan of threats and opportunities.

The trading environment in which our business operates is constantly 
changing, driven by the needs of our guests, our customers and the 
opportunities for growth. These external factors continually change the risks 
faced by our business, many of which are unavoidable and must be robustly 
mitigated if our strategic objectives are to be met. Such factors this year have 
included Brexit, food nutritional content, in particular allergens, environmental 
impacts and new technology. All these areas have created opportunities 
to further protect our existing guests and customers’ interests and attract 
new guests and customers. 

Our risk management processes aim to identify risks before they impact 
upon our activities to ensure that we are in the best place to mitigate those 
risks, and recognise the opportunities they may bring in a competitive 
marketplace. We believe that our guests and customers rightly have a high 
expectation of our ability to maintain the quality of its products and services. 
Risk management is ultimately about control. For all our key risks, we identify 
the key mitigating controls and their ownership. Our assurance activities are 
focused upon those controls so we can continually gauge their effectiveness.

The continuity of our business is implicit in the relationship with our guests and 
customers. We have, in recent years, invested in our IT network to increase 
capacity and resilience to mitigate the threat of disruption. We actively 
consider and rehearse for unexpected scenarios which could impact upon 
us at short notice. This in turn informs the practices and policies which we 
follow and the emergency plans we adopt.

This year we launched a code of conduct The Marston’s Way, to articulate 
what the business expects of our employees and provides links to all the 
central policies that apply to all roles. We have successfully handled 
emerging risks during the year, and improved 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 by increasing the 
auditing of our suppliers.

Our appetite for risk 
The Board’s appetite for risk is a statement of the degree of risk the 
Group is prepared to accept in order to achieve its business strategy. 
The statement reflects the involvement the Board takes in matters of 
risk and the shared understanding of the risk management practices 
operated and their degree of effectiveness.

Marston’s is open to taking risks, providing those risks align with, and 
help us to achieve, our strategic objectives in a responsible way and 
within agreed parameters. Marston’s will, wherever possible, remove 
risks completely that pose a threat to achieving our strategic objectives. 
If avoidance is impossible, Marston’s will seek to mitigate risk by 
investing in effective controls, or by or sharing risks with a third party. 
These controls are managed and monitored to give assurance that the 
risk level is in accordance with the parameters set by the PLC Executive 
Committee (PLC Exec). Our overriding principle of care remains 
integral to achieving our strategic objectives. We continually review the 
risks affecting our business to ensure we maintain our responsibilities to 
our employees, guests, customers and the public, by guarding against 
threats to health, hygiene and safety as an absolute priority.

Principal risks
The principal corporate risks are shown on the matrix plotted against 
impact and likelihood. The position of the risk reflects the position 
as a result of the mitigating controls in operation.

1. Market/operational
2. Business continuity
3. Food safety 
4. Health and safety
5. Information technology

6. Our people
7. Financial covenants 

and accounting controls 

8. Political

t

c
a
p
m

I

7

8

3

1

2

6

4

5

Key

Likelihood

Increasing risk

Decreasing risk

No change in risk

Principal risk assessment 
Current key risk drivers
1. Macro-economic/market factors
Competition for guests in the casual dining market has intensified in recent 
years. Guests have a high expectation that food is delivered with excellent 
service, good quality and at a reasonable value. Levels of discretionary 
spend is impacted by consumer nervousness about the economy, with 
little prospect that this will change in the near future given current political 
uncertainty. Our diverse range of pub formats, beer brands and the flexibility 
of our menus provide us with insight on changing trends and allows us to 
respond by adapting our guest offer. 

2. Food safety
We recognises that identification and control of the food constituents of our 
menu items is essential in order to provide accurate information to our guests 
at the point of sale. There is an increased need to ensure that accurate 
information on allergens is available for our guests. Public sentiment on 
this matter is quite rightly sensitive, with an expectation that food safety 
is paramount.

3. Political
Uncertainty over how the UK leaves the EU continues to impact upon our 
business. Stocks of food and drink items arranged with our suppliers will 
alleviate any short-term disruption, however the business could be quickly 
impacted by a shortage of fresh meat, vegetables and fruit.

Key areas of mitigation this year
1. IT data and business continuity
Investment in the resilience of our IT network has increased the assurance that 
our systems are adequately protected against interference, and that our IT 
contingency arrangements have been engineered to cope with unexpected 
disruption. Policies and practices have been improved in order to better 
protect the personal data we hold internally and contractually with the third 
parties that process data on our behalf.

2. Succession planning
Our Performance, Career and Development Review (PCDR) process 
has been embedded into the business over the last three years. The PCDR 
supports our employees in achieving their personal objectives and provides 
our managers with a clearer vision of how teams can develop to meet the 
future demands of the business.

Marston’s PLC Annual Report and Accounts 2019Our Principal Risks and Uncertainties 

31

The following risks are recognised by the Board to be the principal risks that 
could impact upon the operation of the business strategy. This is not intended 
to be a complete analysis of all the risks, which may change over time. 

All the principal risks listed have an impact upon the two key 
components of our strategy, which are:

1. Operating a high quality pubs and rooms business 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.

Market/operational

The risk

Risk context
Our revenue is dependent upon being That our pubs, brands or
able to offer, and attract, our guests 
to an enjoyable experience, of high
quality at the right price. It is reliant 
upon attracting back existing guests
and winning new guests.

services fail to attract guests, 
do not reflect changing
consumer preferences, 
or offer poor service
or quality. Equally there 
is a risk that our prices 
become uncompetitive.

Potential impact
Reduction in sales, or heavy
discounting in order to 
attract customers.

Mitigation
•  Continual assessment of guest preferences:

market and consumer insight data.

•  Continual analysis of sales performance data

of individual sites and by pub format.
•  Pricing strategy, built upon careful analysis
at sufficient detail of guests’ sensitivities.

•  Marketing, including digital 

marketing campaigns.

•  Cost control, including menu margin analysis.
•  Investment, location and design of our pubs.

Movement: The UK economy has been in a period of uncertainty in recent years. Currently the economic drivers for our guests remain similar 
to previous years as the country pulls away from the EU – employment uncertainty, depreciation in the value of sterling and the threat of inflation. 
This creates a risk for our Group in attracting guests and setting prices at an appropriate level.

Opportunity: The market conditions present an opportunity to gain market share from other operators exiting the market, or who cannot manage 
the risk as effectively.

Business continuity

Risk context
The continuous operation of our 
business is dependent upon the
uninterrupted running of our IT network, 
site links and the internet. In addition 
Marston’s operations are heavily 
dependent on the continual supply
of goods and services often from
single sources.

The risk
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.
The impact of Brexit on 
the efficiency of supply of 
fresh food to our business 
is an uncertain threat in the 
short term.

Potential impact
Disruption to trade impacting 
upon profit.

Mitigation
•  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.

•  IT defences, including dual server capacity, dual
network links and rehearsed recovery plans.

Movement: An internal audit this year of our network resilience confirmed that investment into additional links and upgraded technology 
has significantly reduced the likelihood of external threats impacting upon our computer operations.

Opportunity: Our business reputation for continually high quality products and services continues to grow in the minds of our customers. We have 
a reputation for hard work, dependency and care which helps us to win contracts and create trading relationships.

Marston’s PLC Annual Report and Accounts 2019Strategic Report32

Our Principal Risks and Uncertainties continued

Food safety

Risk context
Our guests’ need for safe and reliable
information on the food ingredients
within our products has never
been higher.

The risk
Breaches of food standards
regulations now attract
increased media attention
and higher penalties.

Food hygiene is fundamental to us and Our customers trust in our
the safety we guarantee to our guests.

high standards of food 
hygiene. That trust could 
quickly be eroded by 
individual incidents.

Mitigation

Potential impact
Increased regulation directly •  Maintain excellent levels of compliance through
affecting Marston’s, or our
suppliers, could increase
the cost of compliance.

policies, training and monitoring.

•  Working with our supply chain to maintain
robust systems for identifying constituent 
food ingredients.

•  Due diligence on accepting new suppliers, 

monitoring and auditing.

•  Tracking meal constituents all the way through to 
our menus and the descriptions contained therein 
and the accompanying allergens lists supplied to 
our team members and the public.
•  Rigorous investigation of complaints.
•  Tracking legislative changes and 

adapting operations.

Movement: Public concern over allergens is growing. Media coverage of the tragic consequences when allergens are unknowingly consumed have 
increased the public expectation that retailers should do more to protect consumers.

Opportunity: There is an opportunity for Marston’s reputation to grow in our guests’ appreciation for the safety of food. We recognise that 
the reliability of the information given to our team members, their training, and their care to engage with this matter is key.

Health and safety

Risk context
The safety of our customers, our
people and the public underpins all
our activities. We seek to attain the
highest levels of safety. Lapses of safety
damage the trust and reputation of 
our Group.

The risk
Breaches of health and
safety or food hygiene
regulations now attract
increased media attention
and higher penalties.

Potential impact
Significant damage
to reputation.

Mitigation
•  Health, safety and hygiene management

systems embedded.

•  Dedicated safety advisers seeking

continuous improvement.

•  Regular independent expert safety audits 

at our pubs.

•  Training of team members.
•  Escalation of potential safety threats to senior 

operational management.

Movement: During 2018/19, we have taken steps to invest in more resource for health and safety by employing the services of three additional 
Regional Safety Advisers to support our pub teams.
Breaches of safety are taken seriously by all levels of our business. When our systems of control are found to be at fault we confront any failing 
honestly, in order to learn and build stronger processes for the future.

Opportunity: In a competitive marketplace there is an increased opportunity to be differentiated in our guests’ minds by absolute commitment to guest 
care, thereby building long-term trust.

Marston’s PLC Annual Report and Accounts 201933

Information Technology

Risk context
Our business is very reliant upon the
Group’s IT network to communicate, 
operate effectively, serve our
customers, process transactions 
and report on results.

The risk
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.

Mitigation

Potential impact
Reduction in the effectiveness •  Anti-virus and firewall protection.
of operations, business 
interruption and loss of profit.
Regulatory fines as a result 
of the loss of data.

and IT policy adherence.

•  Access control, password protection 

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

Movement: Global cyber risk has evolved in recent years, 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.

Opportunity: Our engagement with customers creates increasing digital marketing opportunities for which the security and continuity of our IT network, 
as well as the trust of our customers, is fundamental.

Our people

Risk context
Marston’s operates in a very
competitive environment. There is an
increasing demand for high calibre
people, particularly in our pubs where
Brexit does have an impact tightening 
the labour market. The ability to achieve 
our strategic objectives has a heavy 
reliance upon the quality and training 
of our people.

The risk
Failure to attract or retain
the best people.

Potential impact
Reduction in customer
satisfaction levels.
Financial targets
and strategic objectives
not being met.

Mitigation
•  Continual awareness of our people offer
compared to our competitors through
participation in appropriate networks.

•  Improved training, induction and

development programmes.

•  Development of Marston’s ‘People Promise’.
•  Employee appraisals and development 
programmes – Performance, Career and
Development Review (PCDR).

•  Employee engagement survey and identifying 

action points for teams.

•  Increased focus on the 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 PCDR cycle, now in its third year, has brought a common approach to people development across the Group. PCDR enhances the dialogue 
with employees on expectation, achievement and career progression.

Opportunity: The continual investment in our people creates an opportunity to retain and develop the most talented and committed individuals 
and to remain a very attractive employer when advertising roles.

Marston’s PLC Annual Report and Accounts 2019Strategic Report34

Our Principal Risks and Uncertainties continued

Financial covenants and accounting controls

Risk context
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.

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

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

Mitigation
•  Regular detailed management accounts, budgets 

and forecasts.

•  Constant monitoring of financial ratios.
•  Internal and external audits.
•  Segregation of duties.
•  Access controls within our systems.
•  Levels of authority.

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

Opportunity: Significant new investment over the last two years in our pub financial system has created a unique opportunity to better understand 
our guests’ spend. We have developed our capability to analyse this data to a depth not possible before. The system has improved our ability to target 
offers to customers in a focused way, to roll out marketing campaigns and to price our offers to guests quickly across the whole of our pub estate.

Political

Risk context
The way in which the UK leaves the EU A no-deal Brexit will impact
is currently uncertain. There is a risk that 
no deal is agreed and that there is a
‘hard’ exit.

The risk

upon the deliveries of 
supplies from the EU, in
particular for us those goods
which we cannot stockpile
and where there are no
alternative UK supplies 
at the same cost level for
the quality and quantity 
required, namely fresh meat,
vegetables and fruit.

Mitigation
•  Continual assessment of supply contracts

and renegotiation of terms when they fall due, 
to protect our business from Brexit related costs.
•  Where feasible, working with our key suppliers
to hold stocks in the UK of food and drink which
would be sufficient to cover short-term disruption.

•  Consider alternative sources of supply 

if our existing suppliers experience difficulty
importing goods.

•  Review our agents and procedures for the 

accounting of customs duties and declarations.
•  Support those employees who are EU nationals 

staying and working in the UK.

Potential impact
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 new 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 
continue to be less 
desirable for EU nationals 
which could increase the 
shortage of specific types 
of skilled workers within 
our market sector.

Movement: Marston’s recognises the disruptive effects that Brexit could have upon our business and the UK economy, particularly as the uncertainty 
continues to exist without a future trading agreement.

Opportunity: Brexit related risks are monitored closely by management and reported to the PLC Exec. The business is well-placed regarding the 
preparations it can make, and the understanding of the legal implications of trading with the EU. In 2019/20, we plan to seek independent assurance 
on our preparations for the transition to UK legislation and operations outside the EU once the UK has left.

Marston’s PLC Annual Report and Accounts 2019Our Levels of Defence

1. Management ownership
Our managers are responsible for identifying risks, communicating risks 
and developing responses to those risks which mitigate them to a level which 
is considered acceptable for the business.

Governance framework
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.

Management are responsible for monitoring and reporting upon the 
effectiveness of the controls to the Board via the Corporate Risk Director. 
The managers’ assessment of the effectiveness of the key business controls 
is tested by 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. The communication of policies has been improved 
this year by the adoption of our code of conduct, ‘The Marston’s Way’.

•  Embedded risk management into day-to-day activities.
•  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 designed within a sound framework of 
risk management.

•  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.

2. Committee oversight
The PLC Exec and our beer business divisional board each meet regularly 
to consider how to implement the actions required for the Group to achieve 
its business objectives, and to monitor its risks and opportunities.

Our Operational Directors within the PLC Exec take ownership of the 
implementation of the business strategy, the operation of the business to 
meet operational and financial targets, and the design of internal controls to 
reduce risks. Management collects information through internal processes in 
order to understand fundamentally the risks and directs the response to those 
risks. The management committees consider, communicate and implement 
the decisions on risk made by the Board and the PLC Exec.

See page 43 
for more information

35

We operate a number of committees in order to focus attention upon 
particular areas of risk requiring senior management attention:

Risk & Compliance Committee 
(chaired by the Group Secretary)
The Committee reviews the identification of the principal risks, and considers 
the alignment of audit and compliance testing with the risks. It also conducts 
a focused examination of areas where risks are significantly changing. 
In addition, the Committee tracks the emergence of new legislation 
and monitors the Group’s response to compliance.

Data Security Committee 
(chaired by the Group Secretary)
The protection of personal and commercial data is considered. 
Network protection is reported. Policies are developed and 
monitored to encourage best practice by employees and awareness. 
Legal compliance is monitored and audit test data relevant to data 
protection is considered.

Corporate Responsibility Committee 
(chaired by the Corporate Risk Director)
The ethical approach of the business is considered in all respects. 
The Committee defines the Corporate Responsibility priorities of the business 
and sets targets for the actions associated with those targets.

See page 37 
for more information

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 ability of the business 
to seek alternative supplies at short notice. The Committee is briefed 
on improvements to the resilience of our IT network, its protection from 
interference and the plans in place to recover from any disruption.

3. Assurance governance
Group Risk comprises of 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 and the Group Internal Audit Manager 
attend the Audit Committee meetings and can raise any concerns regarding 
risks independently.

Enterprise Risk Management (ERM)
The Corporate Risk Director, who heads the Group Risk team, operates an 
ERM process in order to identify, monitor and report on those risks which 
could impact on our ability to achieve our strategic objectives. The key risks 
and controls, and their ownership, are assessed more formally during 
bi-annual meetings with the managers. 

The risks are documented in a corporate risk register, access to which 
is appropriately shared with the managers who own those risks. We use 
common risk management tools and language to engender cross functional 
consistency and measurement across the Group.

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 the authority of the Board and in consultation with external advisers. 
New levels of insurance are considered each year in the context of 
changing external threats. This year we expanded our insurance cover 
to include cyber risk.

Marston’s PLC Annual Report and Accounts 2019Strategic Report36

Our Levels of Defence continued

Internal Audit
The Internal Audit function is managed by the Group Internal Audit Manager, 
reporting to the Corporate Risk Director, and is independent from the 
operations of the Group. Internal audit strategy is risk based and is focused 
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 Group Internal Audit Manager. 
The plan takes into consideration the key risks within the business, areas 
of increased risk and the regularity of the testing. The Group Internal 
Audit Manager 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 independent professional internal 
audit co-source for individual projects. The budget for internal audit is 
submitted annually for approval by the PLC Exec and the Audit Committee.

The internal audit projects are planned with the assistance of senior 
management and the results are reported to the business, the Risk & 
Compliance Committee and the Audit Committee. Our internal audit 
co-source assists with the projects associated with higher risks or which 
require specialist skills.

The Group Risk team gathers assurance during the year on a wide range 
of legal compliance areas, pub financial controls, pub compliance, 
data security and health and safety.

4. Strategic
The PLC Exec is chaired by the Chief Executive Officer and comprises 
of, amongst others, operational directors who are responsible for the 
implementation of strategy and for carrying out actions directed by Board, 
monitoring performance and overseeing risk management and internal 
control. 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 and risk management. The mitigation of risk 
is delegated to the Executive Directors and other senior management. 
The Board is responsible for ensuring that management review and report 
on the effectiveness of the internal controls. The Board is also responsible 
for understanding the nature and extent of the principal risks, its risk appetite 
and the Viability Statement. 

Management reporting to the Board must be in sufficient detail for the Board 
to assess its risk appetite in the context of the risks and opportunities, and to 
make informed decisions in order to accomplish the strategic objectives.

During the year, the Board has robustly assessed the risks and opportunities 
faced by the business, taking into account the ability of the business 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 financial performance, 
the current financial 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 
Group 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 
five year financial projections of trading performance, cash flows 
and financing 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 significant downturn;

•  the principal areas of risk as described in this Strategic Report 
and the mitigating actions in place to offset those risks; and

•  confirmation 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 financial period 2023/24, utilising an option included 
in the facility renewal last year and utilised a £40 million accordion 
facility to add further financial flexibility in our short-term financing. 
In addition, the Group received proceeds of £35 million from property 
lease transactions during the period, demonstrating the continued 
attractiveness of the Group’s pub estate. In addition, we reprofiled the 
interest rate swap payments within the securitisation, which will provide 
more headroom against the covenants within the securitisation.

The Group continues to have strong headroom against the financial 
covenants underpinning the financing structure with strong fixed 
charge cover of 2.5 times. As described in the Strategic Report, 
the Board has approved a £200 million debt reduction plan which 
will improve free cash flow to further underpin our ability to meet 
our financial obligations.

The Board has assessed the viability of the Group over a five year 
period as this is consistent with their strategy review process, as 
described above. Given the considerations above, the Directors 
confirm that they believe the Group will continue to be operationally 
and financially viable over the five year period.

Marston’s PLC Annual Report and Accounts 2019Corporate Responsibility

37

Marston’s recognises the importance of corporate responsibility to the 
long-term sustainability of the business, its future growth, commercial 
viability and in maintaining stable relationships with stakeholders.

For this reason we align our Corporate Responsibility (CR) priorities with 
our strategic objectives and identify the actions taken by the Group for each 
CR priority. The actions have been cross referenced to the United Nations 
Sustainable Development Goals in order to understand the alignment of 
our CR agenda with global initiatives. Our CR Committee plays a central 
role in defining the CR priorities and tracking progress against targets set 
for the associated actions. The CR Committee has a wide representation of 
members from across the business including operations, procurement, food 
development, HR, risk and communications.

We remain committed and track our progress 
in achieving our five CR priorities:
•  We invest in our people
•  We partner with suppliers who share our values
•  We care about our guests’ and customers’ wellbeing
•  We celebrate our local communities
•  We reduce our environmental impact

This year has seen good progress working to achieve the majority of our 
CR targets, and has seen the adoption of new targets reflecting our ambition 
to adapt our CR agenda as our business activities change. A vibrant 
CR agenda keeps our people engaged with its relevance to the business 
and reflects the character of the business to strive to achieve long-term, 
sustained success.

With our CR priorities in mind, we track the actions associated with our 
key areas of focus which are ultimately aligned to the Group’s strategic 
objectives. This serves as a CR guide to the operational areas of business:

We invest in 
our people

We partner with 
suppliers who share 
our values

We care about 
our guests’ and 
customers’ wellbeing

We celebrate  
our local 
communities

We reduce our 
environmental  
impacts

Strategic 
objectives

Areas of
focus during  
2018/19

Operating a high quality pub and rooms business offering great places to drink, eat and stay.

Operating a ‘best in class’ beer business with a wide range of premium and local brands and great service.

Apprenticeships

Food supplier  
charter

Healthy options 
on our menus

Support for 
aligned charities

Increasing recycling

Training in our pubs

Improve supplier 
audit programme

Food safety

Community 
Heroes Week

Energy consumption

Talent Academy  
Online

Supplier innovation

Allergens

Local charities

Electric car 
charging points

Marston’s PLC Annual Report and Accounts 2019Strategic Report38

Corporate Responsibility continued

We invest 
in our people

We partner with suppliers 
who share our values

Why this matters to us 
Marston’s recognises the responsibility it has to its employees, they are 
its greatest asset upon which the achievement of strategic objectives is 
dependent. The long-term development of our people, their confidence, 
skills and experience, is a responsibility of the business, but also a critical 
requirement for sustained commercial success. The character of our Group 
attracts talented people to work for us and we recognise the growing 
importance of ESG factors, particularly to the younger generation, when 
choosing employment. We believe that the alignment of corporate values 
with individual values contributes to our people’s enthusiasm to strive for 
success and, ultimately, contributes to healthy customer engagement.

What we have focused upon this year
•  Delivering training earlier 

The target for the completion of induction training for new starters in our 
pubs has reduced from 12 to 2 weeks. This includes all the essential 
knowledge on our Ways of Working, customer care, safety, food 
hygiene, licensing and legal responsibilities.

Why this matters to us 
Our partnerships with suppliers are key to our success, we seek long-
term relationships built upon mutual trust, understanding and profitability. 
Our guests rightly expect that we are diligent in our sourcing of suppliers 
to ensure that goods, products and services are delivered to an excellent 
standard. We seek suppliers who reflect our own corporate values, and 
can demonstrate this during the selection process, their accreditations and 
during the audits which we carry out. We have centralised our management 
of procurement and effectively govern tendering, contract reviews, 
authorisations and the secure transfer of data.

What we have focused upon this year
•  Reducing our supply chain carbon footprint 

New partnership with Yorkshire Greens for our Premium peas which have 
the lowest carbon footprint for frozen peas in the industry; grown within ten 
miles of the factory by a partnership of over 40 family farms. Their state-of-
the-art GWE Biogas plant generates electricity from the production waste 
for processing, packing and cold storage operation.

•  Broader e-learning user base and more modules 

•  Support for local businesses 

Further development of our online Talent Academy and widened its reach 
to employees across the business. Ability to self-author our own e-learning 
training courses. Over 26,000 learning on demand documents were 
accessed by our employees this year. To date, over 100,000 employees 
have received online training. Data protection training was delivered to all 
areas of the business and completion tracked and reported.

Marston’s is proud to be a strong partner of local family businesses. 
Scheff Foods, established in 1987, is a family run business based in 
the Birmingham area and produces a range of authentic ethnic foods. 
We have a long standing relationship with Scheff Foods and continue to 
work in partnership with them bringing the latest innovative, high quality 
food products to our menus. 

•  Expansion in the range of apprenticeships 

We continue to train over 500 apprentices a year within the Group, 
across a range of disciplines, including all six hospitality apprenticeships, 
credit control, learning and development, customer service specialists, 
operations manager and our first senior leader Level 7 master’s 
apprenticeship. 18 employees within our beer business are now studying 
an apprenticeship in order to master their craft. This includes the second 
intake of engineers, in partnership with the JCB Academy, and our first 
Warehouse to Wheels apprenticeship. Our first logistics apprentices have 
progressed to Level 3 supply chain practitioner standard and are seen as 
our Transport Managers of the future. 60% of our apprentices are under 
23 years old; our youngest is 16 and our oldest is 63.

•  A year of recognition for Marston’s

•  Listed in the Top 100 Employers on RateMyApprenticeship, the UK’s 
leading job resource for young people seeking apprenticeships.

•  Hospitality Apprenticeship Employer of the Year (over 1,500 

employees) at the 2019 Caterer.com People Awards.

•  Supporting our supply chain moving to greener energy 

Our supplier Accolade Wines has installed a MW wind turbine at its 
site in Bristol supplying 50% of the energy to their distribution centre, 
the largest in Europe. Despite the restrictive regulations that govern 
onshore wind development in England, the local planning authority 
quickly recognised the contribution that the turbine would make to carbon 
reduction targets with strong support from the local community.
•  Partnerships with technological innovators for green energy 

Our continued partnership with rapid electric vehicle charging network 
Engenie to become the UK’s first pub company to roll out 50 kW rapid 
chargers across sites nationwide. As an early adopter we are able to 
secure electric grid capacity, future-proof our sites and attract the fast-
growing EV population. Usage is in line with the national average and 
we have seen positive media and public reaction. Our chargers have 
powered 150,000 EV miles saving 21.4 tonnes of CO2, the equivalent 
of 175 trees.

Progress against key targets
1. Performance, Career and Development Review (PCDR)
Following three years of successful roll out of PCDR we intend to 
extend its operation to further embed it into the business. In 2019/20 
our area managers will use it in their reviews with our pub managers. 
PCDR has proven a valuable means of engaging with our employees 
on their performance, expectations and future areas of development 
and aspiration.

2. Employee engagement and enablement
Our scores this year were strong for engagement and enablement 
68% and 69%; 2% above the UK average (2017: 73% / 76%). 
We intended to explore the reasons for the fall in score from the 
previous survey and work with our teams to improve on engagement 
and enablement.

Progress against key targets
1. Re-issue our pub Food Supplier Charter 
Our Food Supplier Charter continues to be shared with our food 
suppliers, both current and potential, setting out our expectations 
on quality of product, traceability of ingredients, ethical approach, 
sustainable sourcing and employment rights. The 2019 update provides 
further detail on our expectations regarding the amount and type of 
packaging used and our support for Public Health England’s dietary 
improvement which has meant we were able to achieve our target of 
only using free-range shell egg over a year early.

2. Extensive food supplier audits
With supply chains becoming increasingly globalised and complex, 
we are conducting deeper audits into our supply chain to ensure our 
standards are being maintained throughout. Our rolling programme of 
food supplier audits has completed over 60 audits this year. The audit 
protocol has been updated to ensure it is more robust and challenges 
key areas within our Supplier Charter.

Marston’s PLC Annual Report and Accounts 201939

We care about our guests’ 
and customers’ wellbeing

We celebrate our 
local communities

Why this matters to us 
Our breweries and pubs are highly valued by the communities in which 
they are located. These strong relationships are essential for the long-term 
success of our pubs and form part of the heritage and character of our beer 
brands. We encourage our operators to participate in community initiatives 
such as Best Bar None, Pub Watch and Purple Flag schemes. Every year we 
involve ourselves in community events such as beer festivals, carnivals, coffee 
mornings, family fun days and carol services. We support charities and 
fundraising activities within our communities.

What we have focused upon this year
•  Corporate donations to charities aligned to our business 

Each year we donate to Pub is the Hub, which supports pubs diversifying 
within often small rural communities to incorporate local stores, play areas, 
postal services and libraries. We help fund the Youth Zone (‘The Way’) in 
the City of Wolverhampton which provides valuable youth services to over 
2,500 young people. We have worked with The Way to provide work 
experiences for school children introducing them to what it is like to work in 
an office, brewery or pub. Our support of these charities is aligned to our 
own business: the many small businesses operating in our tenanted pubs 
and the high proportion of young people working in our pubs, for many of 
whom it is their first job.

•  Employee involvement in charitable activities – Food for Christmas  
We opened up a food bank donation point in our head office before 
Christmas 2018 and the food donated was given to local charities. 
Our area managers nominated pubs that had carried out charitable 
activities during the Christmas period and sent them hampers to support 
their fundraising, packed by our office teams.

•  Promoting and supporting fundraising across our pub estate – 

Community Heroes Week 2019 
Our second national Community Heroes Week took place at the end 
of April. This was our largest fundraising activity to date, encompassing 
our offices, breweries and pubs. Over 400 pubs took part with support 
for fundraising ideas from our pub format teams. Our head office was 
buzzing with activities: car washes, bake stalls, quizzes, pub games, 
and BBQs. Around the country our teams were involved in sponsored 
walks, cycle rides, volunteering, car washes and dragging a firkin along 
tow paths in the Midlands. All the funds raised went to different charities 
chosen by our head office teams and pubs.

Progress against key targets
1. Encourage our pubs to engage with their 
local communities
We increased the number of pubs taking part in our Community 
Heroes Week to include many more of our managed pubs.

2. To match any contributions made to charities by our 
people 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.

Why this matters to us 
Our ability to deliver a memorable happy experience to our guests is of 
the highest priority. We work to ensure that our guests are in a comfortable 
environment, catering for the safe consumption of food and drink at the 
highest level. With an increased public sensitivity to allergens we have 
strengthened our processes to identify constituent elements of food items 
within our menu options. We recognise that food can be healthy as well as 
special for our guests, and there are innovative ways in which food can be 
produced to achieve this. We listen to our guests and customers’ preferences 
to adapt our pubs, brands and beers to satisfy changing tastes, lifestyle and 
curiosity. We maintain a catering hotline for our pubs every day of the year 
so that concerns regarding food can be immediately addressed.

What we have focused upon this year
•  Menu calorie reduction 

We have removed millions of calories from our menus, through the 
introduction of exciting new products and removing unnecessary items. 
For example, during the year, guests could choose garlic bread rather 
than automatically receiving it with certain menu choices. This year we 
have tasked ourselves to include at least one vegan dish, and our salads 
are typically below 400 calories.

•  Public health targets and sugar reduction 

We are working with suppliers to reduce the amount of sugar in our top 
selling lines to bring them in line with Public Health England’s 2020 sugar 
reduction targets. Through extensive reformulations our ice cream supplier, 
Beechdean Dairies, reduced the amount of sugar in one of our vanilla 
ice creams. Based on average weekly sales this means our customers 
are consuming a staggering 180kg less sugar per week. In September 
2019, Public Health England reported that average sugar content (per 
100 grams) in food purchased out of the home has reduced by 4.9% 
since 2017 levels. We continue to work with suppliers to contribute 
to this encouraging trend.

•  A greater range of low and no-alcohol drinks and soft drinks 
•  We have extended the range of low and no-alcohol beers and 

ciders, including the introduction of Shipyard Low Tide and the trial 
of Heineken 0.0 on draught. 

•  We offer a wider range of soft drinks in our pubs, from traditional 
draught favourites to bottled fruit drinks and more adult focused 
premium minerals and mocktails.

•  We recognise the growth of the hot drinks category and have invested 
in new coffee machines to improve the offering to our guests. We have 
partnered with suppliers who have sourced our own Rain Forest 
Alliance accredited coffee bean.

Progress against key targets
1. Children’s food strategy
We are working on improving the healthy characteristics of our children’s 
menus while at the same time keeping them appealing for younger taste 
buds. Quorn® chicken nuggets are an example of how innovation can 
provide more healthy alternatives without compromising on taste.

2. Drink allergens
We are extending the recording of drink ingredients which can contain 
allergens. We feel this is a necessary step to ensure our pub teams can 
respond accurately to enquiries. 

3. Maintain the level of test purchases and age 
verification checks
All managed and franchise pubs received test purchase visits during the year.

Marston’s PLC Annual Report and Accounts 2019Strategic Report40

Corporate Responsibility continued

We reduce our 
environmental impact

Our future plans

Why this matters to us 
We believe in the importance of the reduction in environmental 
impact which we monitor continually for our pubs, breweries and 
logistics operations. We publish our emissions online at 
www.marstons.co.uk/responsibility. The business has developed a broad 
environmental agenda reporting to the PLC Exec on initiatives taken at a 
corporate level and at a local site level; remaining responsive to reducing 
environmental harm in an ever-expanding business; and developing business 
activity with sustainability as a key ethos.

What we have focused upon this year
•  Investment in energy efficiency

Since installing the new boiler in our Wolverhampton brewery, gas 
consumption there has fallen by 9% during the year and, over the last 
five years, we have reduced our gas consumption by 21%, lowering our 
emissions and helping to meet our breweries’ climate change targets.

•  Environmental awards received this year 

•  EMA Energy Management Awards – Energy Management Team of 

the Year

•  National Recycling Awards – Partnership Excellence (Commercial)
•  Foodservice Equipment Journal Awards – Operator of the Year for 

Multi-Site Kitchen Projects

•  Footprint Drinks Sustainability Awards – Sustainable Use of Water 

Award & Waste Prevention and Management Award

•  Our water self supply licence allowing us to drive down water usage: 

‘Marston’s Water’
Becoming our own water retailer has allowed us to take control of billing 
and water data and, with increased water meter readings, ensure all sites 
are billed in line with consumption. We were the second company in the 
UK to operate a water self-supply licence in England, supplying retail 
services into our pub estate, breweries and offices. Self-supply has been 
a catalyst for wider water saving initiatives and awareness campaigns 
across the business, saving 135,448 pints of water per day during 
2018/19. Drought intensification is anticipated to increase in the UK and 
it is hoped that ‘Marston’s Water’ will give us the ability to drive further 
water and wastewater reductions.

We invest in people
•  We have launched a new Training Team plan aimed at releasing 
the potential of our people and building capability for the future. 
This encompasses induction training, CPD, keyholder pathways, 
employee support, and increased digital training.

•  We are currently building relationships with universities with the aim 

of collaborating on building a future leaders programme.

We partner with suppliers who share our values
•  To explore the possibility of an ingredients supplier charter for 

beer production.

•  We intend to further our knowledge gathering on our supply chain. 

We are working with SEDEX on how we can utilise their ESG 
database compiled on companies.

We care about our guests’ and 
customers’ wellbeing
•  To further improve our pub food offering, we will continue to seek 
the views of our guests and customers and work with suppliers 
to deliver innovative, exciting and healthy offers with less sugar, 
salt and calorie content.

We celebrate our local communities
•  To target 600 pubs being involved in our Community Heroes Week.

We reduce our environmental impacts
•  Marston’s is committed to further reducing single use plastics. 

For example, removing plastic bottled water from our hotel rooms 
would remove circa 400,000 bottles each year.

•  Our Rapid Electric Vehicle Charging Network – we have committed 
to installing rapid chargers at 200 sites by the end of 2020, with an 
interim target of 80 sites by the end of December 2019.

For more information see our CR report at  
www.marstons.co.uk/responsibility

Progress against key targets
1. Increased recycling
By moving to a paper alternative, we have reduced the amount of 
plastic straws in our pubs by 13 million per year – a 76% reduction. 
During 2018/19 we began installing cardboard balers at our pub sites. 
These compact cardboard into dense bales of high quality compacted 
cardboard, making UK recycling more viable and reducing vehicle 
mileage. As well as operating ‘Zero Waste to Landfill’ we have 
improved our food recycling: during 2018/19, 80% of sites with a food 
offer were recycling food waste, equating to 4,300 tonnes diverted 
from landfill. We are also donating surplus edible food stock from our 
depots and training kitchen to charity.

2. Aim to manage CO2 emissions in relation to activity
Our total energy emissions have decreased this year by 3.7% reflecting 
the investments made, particularly on reducing electricity consumption 
which fell by 4.9%. Improvements include the installation of LED lighting 
into back-of-house areas, timer controls, voltage optimisation and 
the use of ambient air to cool our cellars rather than air conditioning. 
Completion of our Energy & Savings Opportunity Scheme review 
during the year has identified additional opportunities to save energy 
in the future.

Marston’s PLC Annual Report and Accounts 201941

Governance

Chairman’s Introduction 
Board of Directors 
Corporate Governance Report 
Nomination Committee Report 
Audit Committee Report 
Directors’ Remuneration Report: 

Annual Statement by Chairman 
Remuneration Policy 
Remuneration Summary 2019 
Annual Report on Remuneration 

Directors’ Report 
Statement of Directors’ Responsibilities 

42
44
46
50
52
54
54
57 
65
66
73
76

Marston’s PLC Annual Report and Accounts 2019Governance42

Chairman’s Introduction

UK Corporate Governance Code 
compliance statement
The version of the Corporate Governance Code applicable to 
the 2018/19 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 the 2016 Code throughout the reporting 
period under review, with the exception of a short period from when the 
Company was non-compliant with Provisions C.3.1 and D.2.1 of the 2016 
Code. Robin Rowland, a member of both the Audit and Remuneration 
Committees, stepped down from the Board with effect from 31 July 2019. 
Bridget Lea joined the Remuneration Committee upon appointment, 
1 September 2019, and Octavia Morley will join the Audit Committee and 
Remuneration Committee with effect from her appointment date, 1 January 
2020. Further details are set out within the Governance Report.

Governance Report
We have used the key themes of the Code to structure this report:
1. Leadership
Our governance framework, management structure, 
roles and responsibilities are set out on pages 43 to 48.
2. Effectiveness
For details of this year’s Board evaluation, training and 
induction and our approach to diversity, see pages 48 to 51.
3. Shareholder relations
For details of our engagement with shareholders see page 51.
4. Accountability
Details of our internal processes and the report from our Audit 
Committee start on page 51.
5. Remuneration
For details of our proposed new Directors’ Remuneration Policy and 
payments made to Directors during the period, see pages 54 to 72.

Policy that will support the Group’s continued growth and development over 
the next three years.

Remuneration and engagement with shareholders
The focus for our Remuneration Committee this year has been the review of 
our current Directors’ Remuneration Policy, last approved by shareholders 
in 2017. Our principles are unchanged: we aim to provide remuneration 
that motivates, with incentives aligned to strategy that encourage enhanced 
and sustainable performance, without encouraging excessive risk taking. 
The Committee have considered the impact of the 2018 Code on our Policy 
and the outcome of the policy review. Our proposed new Policy, together 
with details of how the current Policy has been applied during the period, 
are set out in the Remuneration Committee report on pages 54 to 72. 
In reviewing the Policy we engaged with our major shareholders to seek their 
views on our proposals. We thank our shareholders for their feedback and 
willingness to engage on these important matters.

Audit
The principal responsibility of the Audit Committee continues to be the 
integrity of our financial reporting and internal controls. During the year, the 
Committee has also overseen the process for re-tendering and selecting the 
internal audit co-source provision. The report from the Audit Committee is on 
pages 52 and 53.

The following pages provide an overview of our key governance activities, 
how we comply with the 2016 Code and reports from each of the 
Nomination, Audit and Remuneration Committees.

William Rucker
Chairman

Dear shareholder

A key role for any Board is to establish the culture, values and ethics of 
the Group; setting the tone from the top. In my first full year as Chairman, 
I am proud to say that rather than setting the tone, the Board is able to 
reflect the unique and special culture that is evident across the entire 
Marston’s business.

Our code of conduct ‘The Marston’s Way’, launched earlier this year, 
recognises that our people care about the importance of running our 
business in an ethical and responsible manner, for the benefit of all our 
stakeholders, and that we are proud to be a part of Marston’s. The Marston’s 
Way, together with the work undertaken to evolve and clarify our belief, 
our purpose, our promise and our Ways of Working, further strengthens our 
governance framework. This framework continues to support the delivery of 
a long-term sustainable business.

The 2016 UK Corporate Governance Code (the ‘2016 Code’) has applied 
throughout the reporting period under review and, with the exception of 
a short period from 31 July 2019 when the membership of the Audit and 
Remuneration Committees did not comply with the relevant provisions, as a 
result of Robin Rowlands’ retirement, the Board considers that we have fully 
complied with the principles of the Code. Further explanation of this is set out 
on the following pages.

The 2018 UK Corporate Governance Code (the ‘2018 Code’) applies 
to the Company with effect from the 2019/20 financial year and, during 
the year, the Board and Committees have given consideration to the new 
and updated principles and provisions, recognising that the business 
already demonstrates many of the behaviours and practices set out in the 
2018 Code. Where relevant, particularly in relation to the proposed new 
Directors’ Remuneration Policy, we have chosen to implement elements of 
the 2018 Code. We will report on the application of the 2018 Code in full, 
in our 2020 Annual Report and Accounts.

Board effectiveness and succession
This year we have carried out an internal evaluation; the summary of our 
findings, plus progress on the actions from the 2018 evaluation, are set out 
on page 48, together with the rationale for not conducting an external 
evaluation this year. This will instead be undertaken in 2020.

As announced last year, Robin Rowland stepped down from the Board in 
July 2019 after nine years as a Non-executive Director. I thank him for his 
valuable contribution to the Group during that period. Following a thorough 
recruitment process we were delighted to announce the appointments of 
Bridget Lea (with effect from 1 September 2019) and Octavia Morley (with 
effect from 1 January 2020) to the Board. Their appointments enhance 
and add to the breadth and diversity of knowledge and experience on our 
Board. Profiles of each Director are set out on pages 44 and 45.

Catherine Glickman, who has served as a Director of the Board since 2014 
and as Chairman of the Remuneration Committee since 2017, has indicated 
her intention to not stand for re-election at our 2020 AGM. I would like to 
thank Catherine for her contribution and her valued insight during her time
with Marston’s. Catherine leaves us with a new Directors’ Remuneration

Marston’s PLC Annual Report and Accounts 201943

1. Leadership

Governance framework

The Board

Principal Committees
Audit, Nomination, Remuneration

Supporting Committees
Risk & Compliance, 
Business Continuity, 
Data Security, 
Corporate Responsibility, 
Treasury

Roles and Responsibilities

Matters Reserved for the Board
Committee terms of reference

Assurance
Internal controls,
auditing,
legal and 
regulatory compliance

‘The Marston’s Way’

Implementation  
of Strategy
Monitoring 
performance

Management Committees
PLC Exec,
Marston’s Beer Company
Divisional Board,
Disclosure Committee

Enterprise wide-risk management

Our Ways of Working

Our governance report explains how we have applied the main principles 
of the 2016 Code, through our governance framework, supporting 
procedures and the work of the Board, its Committees and management. 

The role of the Board is to provide guidance and effective leadership, 
setting the strategic direction of the Group and overseeing management’s 
implementation of that strategy. The Board recognises the unique and 
special culture at Marston’s and looks to support and sustain it by promoting 
our belief, our purpose, our promise and our ways of working. The Board 
supports and encourages good relationships with all our stakeholders.

Board and Committee composition
At the date of this report, our Board 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. Details of the roles and 
responsibilities of each Board member and the Group Secretary are set out 
on page 46.

The governance framework facilitates the formal arrangements for sharing 
of information, encouraging strategic debate and facilitating informed 
and timely decision-making. The Board is supported by the PLC Executive 
Committee (PLC Exec) which comprises key members of the Marston’s 
management team.

The Management Committees meet regularly to oversee the implementation 
of strategy and monitor performance of the business. The Supporting 
Committees’ primary role is to 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 30), our Ways of Working and The 
Marston’s Way (see page 18).

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, most recently reviewed in October 2019, 
is available on the Company’s website www.marstons.co.uk

Having served on the Board since December 2014, Catherine Glickman 
will step down from the Board following the conclusion of the AGM on 
24 January 2020. As previously announced, Octavia Morley will join 
the Board with effect from 1 January 2020. Octavia will be appointed 
as Chairman of the Remuneration Committee following the conclusion of 
the AGM. We consider all our Non-executive Directors (NEDs) to be 
independent and the charts on page 45 show the balance and tenure 
of the Board.

Provision D.2.1 of the 2016 Code requires the Company to establish a 
Remuneration Committee comprised of three independent Non-executive 
Directors. Robin Rowland, a member of the Committee, stepped down 
from the Board on 31 July 2019 and, accordingly, the Company was not 
compliant with this provision until 1 September 2019 when Bridget Lea 
joined the Committee upon her appointment to the Board. No Remuneration 
Committee meetings were held during this period.

Provision C.3.1 of the 2016 Code requires the Company to establish an 
Audit Committee comprised of three independent Non-executive Directors. 
Robin Rowland was also a member of the Audit Committee. Octavia Morley 
will join the Committee upon her appointment, with effect from 1 January 
2020, at which point the Company will be compliant with the equivalent 
provision in the 2018 Code (Provision 24). The Nomination Committee 
considered whether Catherine Glickman or Bridget Lea should be appointed 
in the interim period, given the Audit Committee meeting would be held in 
November with only two members. However, as it was not intended for 
either Catherine or Bridget to be a member of the Committee in the long 
term and the existing members had comprehensive knowledge of the matters 
to be discussed, it was agreed not to make any interim changes to the 
Committee membership and to explain the non-compliance in the Annual 
Report and Accounts. Prior to the November 2019 Committee meeting, the 
Chairman of the Board met with the audit partner and the Chairman of the 
Audit Committee to avail himself of the key points for discussion and to hear 
directly from the Auditors.

Marston’s PLC Annual Report and Accounts 2019Governance44

Board of Directors

Chairman

Executive Directors

William Rucker 
Chairman

Board 
Committees

N*

William is a Chartered Accountant with experience 
in banking and financial services. He is Chairman 
of Lazard in the UK, and brings a wealth of 
knowledge and experience of financial markets, 
corporate finance and strategy to his leadership 
of the Board. William is also currently Chairman 
of the UK Dementia Research Institute. William’s 
City and financial experience, together with strong 
stakeholder management, ability to help businesses 
grow and his previous Chairman roles make him 
ideally placed to be Chairman of Marston’s.

Independent
Yes

Appointed to the Board
October 2018 

Past experience
Chairman of Crest Nicholson Holdings plc 
Chairman of Quintain Estates and Developments 
Non-executive Director of Rentokil Initial plc

Non-executive Directors

Matthew Roberts
Non-executive 
Director

Board 
Committees

A*

N

Ralph Findlay
Chief Executive  
Officer (CEO)

Board 
Committees

N

Ralph was appointed to the Board as Finance 
Director in 1996 becoming Chief Executive in 
2001. Ralph is currently the Senior Independent 
Director at Bovis Homes Group PLC and a Director 
of the British Beer and Pub Association (BBPA). 

In his role as Chief Executive, Ralph brings extensive 
commercial, financial and general management 
experience in a consumer facing industry, together 
with a strong track record of business growth. 

Independent
No

Appointed to the Board
May 1996

Past experience
Financial Controller at Geest plc 
Treasury Manager at Bass plc

Andrew Andrea
Chief Financial 
and Corporate 
Development 
Officer (CFO)

Andrew joined the Company in 2002 as Divisional 
Finance Director for Marston’s Beer Company 
and in 2006 he became Operations Director for 
Marston’s Pub Company. Andrew was appointed 
to the Board as Finance Director in March 2009. 
His role was expanded to Chief Financial and 
Corporate Development Officer in 2016. He is 
currently a Non-executive Director at Portmeirion 
Group PLC. Andrew is a qualified Chartered 
Accountant and brings to the Board a wealth of 
experience gained in financial and commercial 
roles, including strategy and leadership, risk 
management and mergers and acquisitions.

Independent
No

Appointed to the Board
March 2009

Past experience
Roles held at Guinness Brewing Worldwide, 
Bass Brewers Limited and Dolland & Aitchison

Catherine 
Glickman
Non-executive  
Director

Board 
Committees

N

R*

Bridget Lea
Non-executive  
Director

Board 
Committees

R

Matthew is currently Chief Executive of Intu 
Properties plc, having previously served as Chief 
Financial Officer from 2010 to April 2019, and 
is a qualified Chartered Accountant (FCA). 
Matthew has significant real estate and retail 
experience and a strong track record on the use of 
and recycling of capital. Matthew also has recent 
and relevant financial experience, enabling him to 
contribute effectively to the Company as the chair 
of the Audit Committee. 

Independent
Yes

Appointed to the Board
March 2017

Past experience
Chief Financial Officer of Intu Properties plc
Chief Financial Officer of Gala Coral Group Limited
Finance Director of Debenhams plc

Catherine has extensive senior level executive 
experience in public companies, most recently as 
Group HR Director at Genus Plc, where she led 
an agenda on talent and leadership development 
to support growth plans. Catherine retired from 
Genus Plc in 2018. She is currently a Non-executive 
Director of Renishaw Plc, RPS Group plc and 
TheWorks.co.uk Plc. Catherine’s experience, 
including developing reward structures that align 
leadership motivation with group strategy and talent 
and leadership development, make her well placed 
to chair the Remuneration Committee. 

Independent
Yes

Appointed to the Board
December 2014

Past experience
Group HR Director at Genus Plc
Group HR Director at Tesco

Bridget is Managing Director (North) at J Sainsbury 
PLC and has had a distinguished career working 
across multiple leading retail brands. Starting at 
Marks & Spencer in 1994, she went on to hold 
senior positions – spanning a wide range of 
disciplines including sales, operations, marketing, 
supply chain and digital – within retail corporates 
such as Body Shop International Ltd and Clarks 
Shoes Ltd. Most recently she was Director of 
Stores, Online and Omnichannel at O2 where 
she led the re-engineering of the store experience, 
development of an industry-leading digital 
experience and the omnichannel transformation. 
Bridget has been a member of the Board of 
Governors at Manchester University since 2018. 

Independent
Yes

Appointed to the Board
September 2019

Marston’s PLC Annual Report and Accounts 2019Senior Independent Director

Group Secretary

Balance between Executive and 
Non-executive Directors

45

Carolyn Bradley
Senior 
Independent 
Director (SID)

Board 
Committees

A

N

R

Carolyn is a Non-executive Director of B&M 
European Value Retail S.A., SSP Group plc, The 
Mentoring Foundation and Majid Al Futtain Retail 
LLC. Carolyn has a strong consumer focused 
background having spent over 25 years at Tesco. 
She is a Trustee of Cancer Research UK and a 
Member of the Advisory Board of Cambridge 
Judge Business School. Carolyn brings significant 
board and committee advisory experience and, 
through her extensive experience in marketing, 
in the retail industry, brings a strong consumer 
focus to the Board.

Independent
Yes

Appointed to the Board
October 2014

Past experience
Non-Executive Director at Legal & General plc
UK Marketing Director at Tesco
Trustee of the Drink Aware Trust

Upcoming appointment

Octavia Morley
Non-executive 
Director

Board 
Committees

A

R

Octavia is currently Executive Chair of Spicers-
Office Team Group Ltd, Senior Independent 
Director at Card Factory PLC and a Non-executive 
Director of Crest Nicholson Holdings PLC and 
Ascensos Ltd. Octavia has extensive experience 
in both executive and non-executive roles in retail 
and multisite companies having held various senior 
operational and strategic roles across all areas of 
retail at companies including Asda Stores Limited, 
Laura Ashley Holdings PLC and Woolworths plc.

Independent
Yes

Appointed to the Board
Appointment effective 1 January 2020

Past experience
Non-executive Director of John Menzies PLC
Chief Executive Officer, then Chair, 
at LighterLife UK Limited
Managing Director at Crew Clothing Co Ltd 
Chief Executive at OKA Direct Limited

Anne-Marie  
Brennan
Group 
Secretary

Chairman

Executive

Non-executive

Anne-Marie joined the Company in 1998 as 
Group Tax Manager. A qualified Chartered 
Accountant and Chartered Secretary, she was 
appointed Secretary in 2004. 

Appointed as Secretary
October 2004

Male/female representation on 
the Board

Male

Female

Tenure of Chairman and 
Non-executive Directors

0–3 years

3–6 years

6+ years

Key: Board Committees

A

N

R

*

Audit Committee

Nomination Committee

Remuneration Committee

Denotes Committee Chairman

Marston’s PLC Annual Report and Accounts 2019Governance46

Corporate Governance Report

There is a clear division of responsibility between the roles of the 
Chairman and the Chief Executive Officer that 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:

Chief Executive Officer (CEO)
Ralph Findlay is responsible for:

•  The operation, leadership and governance of the Board.
•  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.

•  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.

Senior Independent Director (SID)
Carolyn Bradley is responsible for:

•  Acting as a ‘sounding board’ for the Chairman and an 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 (NED)
The roles of Catherine Glickman, Bridget Lea, Matthew Roberts and 
(with effect from 1 January 2020) Octavia Morley 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 Financial and Corporate 
Development Officer (CFO)
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.

Marston’s PLC Annual Report and Accounts 201947

Board agenda and activities during the year
The Board agenda provides the framework for the Board to shape and 
monitor the Group’s strategy, performance and our Ways of Working. 
The agenda comprises a number of regular reports providing updates on 
the financial and operational performance, consumer insight and share 
analysis. The rest of the agenda is taken up with specific items for discussion 
or debate, taken from a forward agenda or as required according to 
the circumstance. Further detail is set out in the table below. The Board 
met nine times during the year, which allowed sufficient opportunities to 
effectively challenge and monitor the Group’s progress against its strategic 
objectives and within the governance framework. Meetings during the 
year focused on the delivery of our strategic and financial plans having 
regard to the continuing uncertainty from a political and macro-economic 
perspective. Board papers are circulated well in advance of each meeting 
to ensure that the Directors have sufficient time to consider them before the 
meeting. Meetings have been held at a number of our brewery sites and 
pubs during the year. The Chairman introduced a programme of pre-
Board presentations taking place the evening before the Board meeting, 
at which senior management present on various matters in greater depth. 
The managers then join the Board for an informal dinner allowing Directors 
an opportunity to further engage with the teams on the specific subject areas 
and more generally.

Management Committees
Our PLC Exec meets on a monthly basis to review operational performance, 
controls and people matters; consider property proposals, capital investment 
and new initiatives; and to approve internal policies, governance and 
financial matters within the authority limits delegated annually by the Board. 
The Committee comprises the CEO, CFO, Managing Director (MD) of 
our beer company, the Director of Venture Pubs and Estates, Director of 
Operations for Pubs and Bars, Director of Strategy and Services for Pubs 
and Bars, MD of Premium Bars and Restaurants, Group HR Director and 
Group Secretary.

Due to the breadth and complexity of operations within our beer company 
division, a separate management board is in place. 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), Director of Marketing, Group HR Director and 
Group Director of IT. The MBC strategy is presented to the PLC Board for 
review and approval annually. The extent of the MBC Board’s autonomy 
is determined by this strategy and the Group’s financial authority limits. 
The MBC Board meets on a bi-monthly basis to review the operational 
performance of each channel, capital investment proposals, people matters 
and strategic initiatives.

The Disclosure Committee, comprising the CEO, CFO and Group Secretary, 
meets as and when required to discuss matters arising in accordance with 
the EU Market Abuse Regulation, the FCA (Financial Conduct Authority) 
Listing Rules and the Disclosure Guidance and Transparency Rules to ensure 
Marston’s PLC meets its obligations.

The work of our supporting committees is described in the Risk Management 
section on page 30.

On the Board agenda

Strategy and 
performance

Guest and customer focus  Shareholder 
and business operations

focus

Governance  
and risk

Leadership and 
people development

Financing arrangements and 
debt reduction plans

Health and safety and 
food safety

Share price performance 
and investor relations

Risk and risk management

Gender pay gap reporting

Operating plans and targets 
for 2019 (Annual Plan)

Consumer segmentation and 
consumer insight reports

Post investment appraisal – 
Charles Wells Beer Business 
(CWBB)

Results, trading updates and 
Annual Report and Accounts

Operating plans and reviews

Shareholder feedback and 
market perceptions

Evaluation of Board and 
Committee effectiveness

Executive succession 
planning

Property and estate management

Forthcoming AGM

Regular Brexit updates

Share register analysis

The UK Corporate 
Governance Code and 
other reporting obligations

Environmental and 
Corporate Responsibility 
updates

The Marston’s Way

People Strategy

Workforce engagement 
mechanism

Marston’s PLC Annual Report and Accounts 2019Governance48

Corporate Governance Report continued

Committees
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 reviewed at least annually, and updated as necessary, 
by the Committee before they are considered and approved by the Board. 
Reports from each Committee can be found on pages 50, 52 and 54.

Board and Committee meeting attendance
Board and Committee meeting attendance is shown in the table below. 
The Board calendar of meetings is set and reviewed at least 18 months 
in advance, allowing the Directors to plan their time accordingly.

Name

Andrew Andrea
Carolyn Bradley
Ralph Findlay
Catherine Glickman
Bridget Lea1
Robin Rowland2
Matthew Roberts
William Rucker

Board

9/9
9/9
9/9
9/9
1/1
8/8
9/9
9/9

Nomination

Audit

Remuneration

–
3/3
3/3
3/3
–
2/2
3/3
3/3

–
3/3
–
–
–
3/3
3/3
–

–
3/3
–
3/3
–
3/3
–
–

1  Bridget Lea joined the Board with effect from 1 September 2019.

2  Robin Rowland stepped down from the Board with effect from 31 July 2019.

3  Octavia Morley joins the Board with effect from 1 January 2020 and as part of her induction attended the 

September Board meeting.

2019 strategy day – on the agenda
The Board held this year’s annual strategy day at The Farmhouse, 
Mackworth, Derbyshire and were joined by the PLC Exec to consider 
strategy, implementation plans and people in greater depth. The key 
themes of the day comprised:

•  Market trends, industry competition and consumer behaviour.
•  Pub estate structures, opportunities to drive further improvement and 

cultural shift. 

•  Greater focus on building partnership relationships with property-

based agreements.

•  Factors determining the rate of growth of the beer business, the brand 

strategy and the importance of new product development and innovation.
•  A review of the talent pipeline and an alignment of the People Strategy to 

the employee journey.

•  Financial plans and de-leveraging opportunities.

Presentations were received from the pubs business, beer business and HR 
management which informed open discussions and challenge from the 
Board. The Board heard how the managed pub estate had undergone an 
operational restructure based on insight and customer segmentation work, 
how menus were being simplified further whilst keeping pace with consumer 
trends and the cultural shift to identifying purpose and delivering it. The Board 
discussed whether even more emphasis should be given to the cultural shift. 
The beer business outlined its growth plans and opportunities for greater 
growth; the Board challenged the ambition of the brand strategy. The HR 
Director presented the evolved People Strategy and the Board considered 
the review of pub management capability and the talent pipeline.

2. Effectiveness

The Board is responsible for ensuring that it maintains the necessary skills, 
experience and knowledge to discharge its responsibility for the long-term 
sustainable success of the Group.

Commitment
All of our Directors are expected to allocate sufficient time to the Group to 
discharge their duties and responsibilities effectively and this is reviewed 
regularly with the Chairman as part of the annual evaluation process. 
Significant commitments of the Directors, outside of Marston’s, are disclosed 
to and approved by the Chairman prior to appointment and when there 
are any changes. The Board has authority, under the Company’s Articles 
of Association, to authorise potential conflicts of interest and to impose any 
conditions it sees fit. Actual and potential conflicts are reviewed by the Board 
on an annual basis.

Board evaluation and summary
In considering this year’s annual Board evaluation the Directors had regard 
to the fact that the Chairman had yet to complete his first year in office 
and the Board was in the process of Non-executive Director recruitment. 
As such, it was considered appropriate to defer an externally facilitated 
evaluation until next year when the Chairman and the new Non-executive 
Directors will have had time to assess the operation of the Board. An internal 
evaluation of the effectiveness of the Board and each of its Committees was 
undertaken this year in a consolidated approach, led by the new Chairman. 
In addition to the Chairman’s own induction meetings with each Director, 
a questionnaire was completed by each Director which formed part of 
the annual meetings to discuss effectiveness and contribution. The Non-
executive Directors also met without the Chairman being present to discuss 
his performance and the conclusions were fed back to the Chairman by the 
Senior Independent Director. The Chairman then summarised the comments 
for consideration and discussion by the Board. Agreed action points, 
together with an update on progress against 2018, are shown opposite.

The Chairman concluded that the Board is satisfied with its own effectiveness 
and that of its committees. The Non-executive Directors have welcomed 
the NED-only catch ups at the conclusion of each Board meeting and the 
opportunity to meet more of the teams at pre-Board dinners. The Board is 
satisfied that the financial plans to achieve our stated debt reduction are 
well managed.

Training and development
Following on from the introduction of a more formal site visit programme 
last year, the Non-executive Directors have continued to spend days in 
trade with members of the PLC Exec and senior management to maintain 
their knowledge or better understand the current operational challenges 
for the business. The pre-Board presentations are also designed to update 
the knowledge of NEDs and their familiarity with the business as well as 
providing an opportunity to spend time with those teams more informally. 
In addition, the NEDs attend external technical seminars offered by 
professional advisers and have received internal briefings on emerging 
legislation as it relates to the Group, compliance and regulatory matters 
which this year included the 2018 UK Corporate Governance Code and 
new Company Reporting Regulations. The Group Secretary advises the 
Board on matters of governance and is available to all Directors in an 
advisory capacity, including the appropriateness of seeking independent 
professional advice.

Marston’s PLC Annual Report and Accounts 201949

Board evaluation

Our 2018 recommendations

Update

Our 2019 recommendations

•  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 

Group premises

•  Consideration of the investor register, 

engagement and objectives of stakeholders

•  The Board has reviewed succession planning 

•  A continued review of succession planning at 

at Board and PLC Exec level

•  In addition to regular consumer insight papers, 
the Board received a presentation on customer 
behaviours and segmentation

•  The Board has visited three brewery sites 
during the year and stayed in four of our 
managed pubs

•  Board meetings have been held away from 
head office and at various Group sites on 
four occasions

•  The Board received a presentation from the 
Company’s brokers on market perceptions

Board and senior management level
•  A continuation of Board meetings held at 

various Group premises and of pre-Board 
presentations by specialist teams

•  A list of future topics for presentation to inform 

Board discussion

•  Greater focus on customer experience to 

achieve operational performance

The Company’s bespoke induction programme offers a range of information, 
a series of meetings with senior management and advisers and site visits. 
The programme is tailored to each individual Director joining the Board 
through input from the Chairman, CEO, CFO, Group Secretary and the 
new Director. Prior to her first Board meeting, Bridget Lea met the Group 
Secretary, CEO and CFO at the Group’s head office in Wolverhampton 
along with various team members as she toured the offices. This provided 
an opportunity to discuss the Group’s strategy, performance, finances and 
governance matters; as well as having a tour of Banks’s Brewery by the MD 
of the beer business and lunch in a Tavern. In addition, Bridget has also met 
with the Corporate Risk Director, our Group Head of Health and Safety and 
undertaken the required training in relation to GDPR and Competition Law. 
Bridget has had meetings with our brokers, financial PR agency, audit partner 
and remuneration advisers to fully brief her on, amongst other matters, the 
obligations of a listed company. She will also spend days in trade with each 
Operational Director (of the PLC Exec) visiting various pub and brewery 
sites and will spend time with the Group HR Director to understand the 
People Strategy.

Our approach to diversity (including gender diversity)
The Board, through the CEO, takes overall responsibility for diversity, 
inclusion 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.

The WeQual national awards have been launched to recognise the 
contribution that women one level below Executive Committee in FTSE 350 
companies make to the business. The awards are designed to help drive 
equality in the hospitality industry. We are proud to have one individual 
winner in the category of Best Operator along with three individuals who 
have been recognised as finalists.

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 policies 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 28 September 2019:

Directors

Senior Managers

Male 4

Female 3

Male 30

Female 19

Total employees

Male 6,832

Female 7,206

Re-election of Directors
With the exception of Bridget Lea and Octavia Morley (who will offer 
themselves for election by shareholders at their first AGM) and Catherine 
Glickman (who is stepping down after serving on the Board for over 
five years), 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 44 to 45 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.

Marston’s PLC Annual Report and Accounts 2019Governance50

Nomination Committee Report

Membership
William Rucker (Chairman)
Ralph Findlay
Carolyn Bradley
Catherine Glickman
Robin Rowland (until 31 July 2019)
Matthew Roberts

Dear shareholder

At the end of my first year, as Chairman both of the Company and 
Nomination Committee, I’m pleased to report that we have made progress 
on our succession planning strategy. With the retirement of Robin Rowland, 
we took the opportunity to review the future needs of the business and 
challenges we face in the market. Following that review, we have appointed 
two new Non-executive Directors both of whom have a customer-centric 
focus with operational retail experience. We will continue to review our 
succession planning strategy to ensure the Board composition and that of the 
senior management team reflects and aligns with the needs of the business. 
In addition, we have made changes to the structure of Board meetings to 
allow for the Directors to be briefed more regularly on operational initiatives 
by teams in an informal environment to better understand the activities and 
views of our people.

Our approach to Board diversity
We recognise the importance and value that diverse perspectives bring 
to the Board and our business. As a Committee we will continue to make 
appointments on merit and we require the recruitment process to incorporate 
the widest range of suitable candidates when drawing up long lists and 
short lists. The Board’s approach to diversity is aligned to the Group’s 
policy referred to on the previous page. Currently, three of Marston’s seven 
Directors are female. One member of the PLC Exec is female, two of the 
MBC Board are female and 38% of the senior management population 
are female.

Evaluation and re-election
As previously stated, Robin Rowland retired from the Board during the year 
and Catherine Glickman has indicated her intention not to stand for re-
election having served five years on the Board. 

In this, my first year as Chairman and with the subsequent changes in Non-
executive Directors, I wanted to spend time getting to know each Director 
and to assess the overall performance of the Board. For this reason, I have 
deferred the external evaluation until next year by which time all Board 
members will be better placed and informed to contribute to the process. 
As part of this year’s internal evaluation I have met with each Director to 
discuss their personal effectiveness and commitment to the Board. I am 
satisfied that the tenure of each Board member provides the right balance of 
experience and fresh thinking. I have concluded that all Directors have been 
effective in their role during the year and therefore recommend each Director 
standing for election or re-election at the forthcoming AGM.

William Rucker
Chairman of the Nomination Committee

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: www.marstons.co.uk

Key activities during the reporting year
•  Review structure, size and composition of Board and Committees.
•  Succession planning review to consider the Executive pipeline and 

actions to address requirements.

•  Consideration of this year’s Board evaluation process.
•  Reviewing the contribution and tenure of each Director before 

recommending for re-election.

•  Appointment of two new Non-executive Directors.

Developing the NED team
Having served nine years on the Board, Robin Rowland stepped down at 
the end of July. Ahead of his departure the Committee had considered the 
desired skills, personal attributes and experience that would be of benefit to 
the Board in future Non-executive Directors. As a result, two new NEDs have 
been appointed to refresh the Board. The Chairman has also introduced 
pre-Board briefings where management provide presentations on particular 
areas of the business to a greater depth.

Executive management
Each of the Directors responsible for pub operations and property and the 
Managing Director of our beer business, together with the new Group HR 
Director, have attended a number of Board meetings at which they have 
presented their respective strategies, provided updates on implementation 
plans and performance and partaken in wider discussions. Additionally, 
the Chairman and NEDs have spent time with individual PLC Exec 
members to ensure visibility and accountability for performance. As a result, 
the Committee is satisfied that the Board continues to discharge its duties 
effectively with two Executive Directors.

Marston’s PLC Annual Report and Accounts 201951

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 2020 AGM are set out in the separate Notice 
of Meeting.

Shareholder engagement summary 
Key communication channels

Institutional shareholders 
and analysts
Rolling investor relations 
programme

Private client fund managers
Regular meetings with 
CEO and CFO

Bi-annual written 
feedback received
Chairman and SID 
available to meet with 
largest shareholders

Private shareholders
AGM with full Board 
and senior management 
present
Annual Report and 
Accounts
Website

Analysis of shareholder register by investor type

Private client fund managers 28.86%

Private investors 15.66%

Institutional investors 55.48%

4. Accountability

Fair, balanced and understandable
To support the Board’s assessment of whether the Annual Report and 
Accounts as a whole is fair, balanced and understandable, comprehensive 
reviews are undertaken throughout the year-end process by Company 
Secretariat in conjunction with the Finance team and support from other 
teams across the business. Drafts of each section of the Annual Report 
and Accounts are reviewed for consistency across the whole document 
and the accuracy of all information is verified by supporting evidence. 
Once ready, the drafts are submitted to the Board ahead of approving the 
final documents to allow them time to review, discuss and where thought 
appropriate, challenge the content. The external Auditors review the 
consistency between the narrative reporting and financial disclosures.

Compliance
The Risk & Compliance Committee monitors all areas of legal and regulatory 
compliance across the business. At its quarterly meetings the Committee, 
which includes representatives from across the business as well as the 
Corporate Risk Director and Group Internal Audit Manager, consider the 
impact of any emerging legislation on the business, the effectiveness of 
our internal controls and compliance processes. The discussions inform the 
Internal Audit plan and provide focus for annual compliance testing that 
seek reassurance that the Group is complying with relevant legislation as 
well as its own policies and procedures.

Risks and internal controls
The Group’s approach to risk management, systems and internal controls is 
explained in the Strategic Report on pages 30 to 39.

Recruitment
Having considered the key attributes the Board was looking for, the Committee 
also discussed the recruitment process and the composition of a panel to 
manage the selection. To assess the suitability of prospective search agencies, 
the Chairman and Group Secretary short-listed two firms that best demonstrated 
their understanding of the business, its needs and how they could support the 
process. Having met both firms, the Company appointed Ridgway Partners 
to assist with the search. A panel comprising the Chairman, CEO and Group 
Secretary reviewed a long list of potential candidates, in conjunction with 
Ridgway Partners, before drawing up a list of seven candidates to meet. 
Following these interviews, the panel were unanimous in their recommendation of 
both Bridget Lea and Octavia Morley for consideration. Both displayed a strong 
customer-centric focus and operational retail experience during their interviews 
along with an ability to understand and form an opinion on wider business 
matters. Octavia has PLC experience whilst Bridget brings a perspective that is 
different to the current composition of the Board as a result of a more diverse 
background. For these reasons the Board concluded that offering a role to both 
candidates would be in the best interests of the business.

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. The CEO and CFO host meetings with our major 
shareholders and private client fund managers to present the half year 
and year-end results. Following these meetings, 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 and, this year, the Chairman met with existing 
and potential investors.

The investor relations programme is managed by the Executive Directors and 
focuses on engagement with institutional shareholders, fund managers and 
analysts. The CEO and CFO meet with private client fund managers on a 
regular basis, and at several locations across the country, to discuss strategy, 
performance, management and governance. The key topics discussed with 
investors this year covered:

•  Current market conditions 
•  Consumer trends
•  Cost outlook 
•  Evolution of pub offer 
•  Expansion of wet-led pubs
•  Beer company strategy and expansion plans
•  The debt reduction strategy

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 
a wealth of 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.

Marston’s PLC Annual Report and Accounts 2019Governance52

Audit Committee Report

Dear shareholder

I am pleased to present the Audit Committee’s report for the period ended 
28 September 2019. Throughout the year we have continued our focus 
on the integrity of financial reporting and internal controls as well as the 
principal risks and the potential impact on our business.

As well as reviewing the Group’s financial statements for the full and half 
year, the Committee considers all forthcoming accounting changes. Due to 
the potential magnitude of IFRS 16 ‘Leases’ on the Group, it was felt more 
appropriate that the Board as a whole consider our proposed approach 
to these changes. Further details are outlined in Note 1 to the Financial 
Statements, on page 89.

As Chairman, I also meet independently with the external Auditors, the CFO, 
the Corporate Risk Director and the Group Internal Audit Manager. I have 
an open and professional relationship with each of them and I am confident 
in their capabilities and the level of assurance that they provide.

This is the final year of service by our external Auditors, PwC, and I should 
like to acknowledge the quality of their audit and independent judgement 
which has challenged management’s thinking over the years and contributed 
to improved standards. Following the sign off of this year’s Annual Report 
and Accounts, PwC will resign to allow our incoming auditors, KPMG, to 
begin preparations for their first audit of our Interim Results in 2020.

Shortly after the year-end, the Committee has also overseen the selection of 
a new internal audit co-source to support the work of the Internal Audit team, 
most notably where specialist knowledge or experience is required.

Matthew Roberts
Chairman of the Audit Committee

Membership
Matthew Roberts (Chairman)
Robin Rowland (until 31 July 2019)
Carolyn Bradley
Octavia Morley joins with effect from 1 January 2020

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 Interim Results and the Annual Report and Accounts 

prior to Board approval.

•  Reviewing the main corporate risks and assurances from testing the 
systems and processes for managing and mitigating those risks.

•  Reviewing the Viability Statement and five-year time period.
•  Approving the Internal Audit Plan and review audit outcomes.
•  Considering and approving the process for re-tendering the 

co-source provision.

•  Reviewing and approving the Statutory Pubs Code 

compliance report.

•  Considering and reviewing the activity and effectiveness of the 

Whistleblowing Policy.

•  Reviewing the expected impact of IFRS 16 ‘Leases’ disclosures.

Marston’s PLC Annual Report and Accounts 2019Auditors
The external Auditors attend each meeting, providing the Committee an 
opportunity to discuss the integrity of the Company’s financial reports. 
The Auditors present their audit strategy, findings and conclusions in respect 
of the Annual Report and Accounts and Interim Results. Noting the annual 
review of independence that the Auditors conduct in respect of all services 
provided to the Group, the Committee is satisfied that the Auditors remain 
independent and objective in their conduct of the audit. In assessing the 
work of the Auditors, the Committee remain satisfied with the scope of their 
work and their effectiveness. As previously announced, KPMG will assume 
the role of external Auditor at the conclusion of the FY2018/19 audit and, 
therefore, the Committee does not recommend the re-appointment of PwC 
to the Board. The Committee considered the transition arrangements for the 
change of Auditor and noted that PwC will resign following the sign off of 
the Annual Report and Accounts to enable KPMG to commence their audit 
work preparations for 2020.

The Committee accepts that some non-audit work is most appropriately 
undertaken by the external Auditors; it must be in accordance with the 
Committee’s terms of reference and its policy on non-audit services. 
In accordance with the policy, where the Auditors are considered to be the 
most appropriate provider of permissible work the Chairman of the Audit 
Committee must approve work expected to be in excess of £50,000, 
or, for fees in excess of £100,000 the Audit Committee must approve the 
appointment. Below that amount, the CFO has authority to approve such 
work. The Company has used other accounting firms for some non-audit 
work comprising VAT advice and on the automation of some tax compliance 
processes. In each case, consideration is given to the need for value for 
money, experience and objectivity required in the particular circumstances.

Internal Audit function 
The Corporate Risk Director and Group Internal Audit manager attend each 
Committee meeting to provide ongoing assurance and regular updates 
on the Group’s main risks and internal audit activities. The findings from 
internal audits, together with progress on actions identified are reviewed 
and considered. During the year, the Committee also considered the tender 
process for the Internal Audit co-source. Following discussion, it was agreed 
to invite BDO, Deloitte, PwC and Grant Thornton, the incumbents, to tender. 
Each firm met with the Corporate Risk Director and Group Internal Audit 
manager for an information gathering and briefing session before presenting 
their proposals to a panel of the Committee Chairman, CFO, Group 
Secretary, Corporate Risk Director and Group Internal Audit Manager. 
In assessing the tender proposals and presentation received the panel 
considered the ability of each firm to deliver their service, their methodology, 
relevant experience and knowledge of key audit issues. The panel 
concluded unanimously that PwC should be appointed as the new internal 
audit co-source. They will be appointed after the conclusion of the 2020 
AGM when PwC will complete their role as outgoing external Auditor.

53

Statutory Pubs Code
The Group has continued its commitment to working effectively within the 
Pubs Code regulations. Processes are reviewed on an ongoing basis and 
any changes that are required are implemented to ensure streamlined 
operations which are compliant with the provisions of the Pubs Code.

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 1 April 2018 to 
31 March 2019.

During the reporting period, Marston’s were not subject to any investigations, 
enforcements or representations of unfair business practices by the PCA.

Nine referrals were made to the PCA, all of which were in relation to the 
MRO provisions of the Pubs Code. Two referrals made prior to the reporting 
period were awarded against Marston’s during the reporting period. 
Remedial actions were implemented in both cases.

During the reporting period, all of Marston’s Business Development 
Managers received updates and training on the Pubs 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:

Valuation of property assets

1. 
The Committee considered management’s annual assessment of the value 
of the Group’s properties and the methodology applied thereto. Noting the 
assumptions adopted and recent market indicators, the Committee are 
satisfied that the impairment of £70.7 million is appropriate to reflect the 
permanent diminution in value of certain underperforming sites within 
the Destination and Premium estate. Having considered management’s 
rationale, the Committee concluded further that the disposal of a portfolio 
of pubs subsequent to the balance sheet date does not necessitate any 
additional impairments within the remaining estate.

2. Valuation of financial instruments
Noting that the recouponing of one of the interest rate swaps has caused 
the hedging relationship to cease, the Committee considered the fair value 
movement in respect of this swap which will be accounted for through the 
income statement from this year onwards, noting the volatility to the results 
that it will create. The remaining swap continues to be effectively hedged 
with movements recognised in the hedging reserve. The Committee also 
considered management’s calculation of its own credit risk for these liabilities 
and concluded that the approach and resulting calculation is appropriate. 

3. Non-underlying items
The Committee considered the items classified as non-underlying and in 
particular the reorganisation and integration costs and the valuation and 
disclosure of financial instruments. Noting the consistency of approach 
with prior years, the methodology and the Group’s accounting policies, 
the Committee is satisfied that the items are classified appropriately. 

4. The expected impact of IFRS 16 ‘Leases’
The Committee and Board considered the assumptions, calculations and 
assessment of the impact on the accounts of the new lease accounting 
standard. The Committee considers the approach adopted to be 
appropriate and is satisfied that the disclosed impact range on the income 
statement and balance sheet represents a reasonable assessment of the 
effect of the new IFRS 16 ‘Leases’ which comes into effect from the start 
of the new financial year.

Marston’s PLC Annual Report and Accounts 2019Governance54

Directors’ Remuneration Report
Annual Statement

LTIP 2016/17
The performance period for the 2016/17 LTIP award ended on 
28 September 2019. For the CROCCE and relative TSR measures, the 
Group did not exceed threshold performance of base +0.25% and 
median performance respectively and, as such, these elements of the 
award did not vest. For the Free Cash Flow (‘FCF’) element, the Group 
achieved £325.2 million which exceeded threshold performance of base 
+7.5%. The Committee agreed that 11.2% of the maximum award had met 
the performance conditions and were due to vest, however, given the 
challenging performance in 2018/19 and in recognition that there will be 
no bonus payable under the Group bonus scheme, the current Executive 
Directors have chosen to waive their rights to the award. Further information is 
provided on page 67.

Proposed policy changes for 2020
The Committee has undertaken a detailed review of remuneration, in 
the context of strategy, performance and in response to the 2018 Code. 
The policy has been determined after reviewing the impact of the previous 
policy and taking into account discussions with shareholders. Measures to 
avoid or manage conflicts of interest are discussed within our Corporate 
Governance Report on page 48. We are not proposing fundamental 
changes to our remuneration structure, which we believe is aligned with 
shareholder interests, supports the delivery of our business strategy and 
appropriately rewards our leadership team. The changes made to the 
proposed policy compared to the policy approved at the 2017 AGM 
are summarised below.
•  Under the current policy, pension provision is 25% of salary for Ralph 
Findlay and 20% of salary for Andrew Andrea, delivered as a cash 
allowance. Ralph’s pension allowance is a legacy arrangement arising 
from his previous participation in the Group’s defined benefit plan. 
Recognising the provisions of the Code and the developing practice and 
shareholder sentiment in this area, the Committee originally intended 
that his pension would remain fixed at an absolute amount and would 
not increase over the next three years, thereby reducing his pension 
contribution in line with any salary increases. However, after further 
discussions with shareholders and in response to shareholder feedback, 
the CEO has volunteered to reduce his pension provision to 20% of 
salary, effective from the start of 2019/20. The Committee will continue 
to review and consider evolving market practice and investor views with 
regards to the pension arrangements for existing Executive Directors 
recognising that these are contractual rights. 
For future hires at Executive Director level, pension provision (or cash 
allowance) will not exceed the pension contributions available to the 
majority of those employees who participate in the Company’s Group 
Personal Pension Plan (‘GPPP’). A current population of around 1,800 
employees participate in the GPPP. Company contributions under the 
GPPP range from 5% to 10.5% of salary with the majority of employees 
in the GPPP benefiting from a 7% salary rate. Future hires at Executive 
Director level would also receive this rate.

•  Extending the recovery provisions (malus and clawback) for both the 

bonus and LTIP to include, as trigger events, serious reputational damage, 
corporate failure and material failure of risk management. 

•  Increasing minimum shareholding guideline to 200% of salary for all 

Executive Directors (previously 200% of salary for the CEO and 100% 
of salary for other Executive Directors).

•  Introduction of a post-employment shareholding guideline, as discussed 

further on page 71.

•  The Committee has reviewed the structure of the annual bonus scheme and 
determined that, going forward, up to 20% of maximum would be payable 
for delivering an appropriately stretching level of threshold performance. 
The Committee considers this to be a better construct as, over recent years, 
our employees (including our Executive Directors and PLC Executive 
Committee) have been instrumental in delivering strong results against 
budget and improvements against the prior year but this has not been 
appropriately recognised under our current bonus parameters. In prior 
years, there has been no vesting unless growth is delivered year-on-year.

Dear shareholder

I am pleased to present our report for the period ended 28 September 
2019. Our focus for the year has been the review of the current Directors’ 
Remuneration Policy and its alignment with our updated strategy. 

Strategic context
Our operational strategy remains focused on offering our customers and 
guests a great experience through both our pubs and our beer business. 
During the reporting year, we announced that we planned to reduce net 
debt by £200 million to £1.2 billion by 2023. This will be achieved by 
deferring our new-build programme, reallocating and reducing capital 
expenditure; disposing of certain non-core assets; interest savings within 
the securitisation and a forecast reduction in contributions to the final salary 
pension scheme.
We are focused on improving organic growth and driving returns in our 
core business across our existing high quality property portfolio of leased 
and managed pubs and in our beer business. We have also committed to 
maintaining our dividend at the current level over the debt reduction period.
The Committee works to ensure there is a clear, simple and consistent 
reward structure across the business, aligned with shareholder interests and 
supporting the creation of sustainable shareholder value. 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. We believe that the changes outlined 
below deliver a Remuneration Policy (‘policy’) that rewards delivery of 
our strategy, whilst aligning with the provisions of the 2018 UK Corporate 
Governance Code (‘2018 Code’), in a commercial and pragmatic way.

Review of the year
Performance
Both the Chairman’s Statement and CEO Statement report on our 
performance in 2018/19 and comment on the challenges we face in an 
uncertain economic climate. The business delivered growth in underlying 
revenue with a strong trading performance in wet-led pubs and brewing 
despite challenging comparatives against 2017/18 but with more subdued 
sales in food-led pubs. Underlying profit before tax was £101.0 million 
(2018: £104.0 million).

Performance outcomes for the year
Annual bonus 2018/19
The 2.9% decrease in underlying Group profit before tax versus 2017/18 
is below threshold performance of £104.0 million for that element of the 
bonus. Cash return on cash capital employed for the year was 10.4% 
and below threshold performance of 10.5% for that element of the bonus. 
Based on these results no bonus is payable to the Executive Directors; 
further information is given on page 67.

LTIP 2015/16 award vesting
As reported in the 2018 Directors’ Remuneration Report, the performance 
targets for the 2015/16 LTIP award were not met and the award lapsed in 
June 2019.

Marston’s PLC Annual Report and Accounts 201955

Given the uncertainty in the market and current environment we are 
facing, we believe that delivering this threshold performance year-on-
year is becoming progressively more demanding, especially in light of 
our tighter margins from an increasingly competitive market and lowering 
demand. Rather than reducing the performance required at threshold, 
the Committee believes that vesting for threshold performance, of up to 
20% of maximum for achievement of prior year performance is a more 
appropriate recognition of the team’s contribution to delivering strong results 
in this challenging market. We plan to set stretching annual profit targets, 
based on our strategic plan and reward organic growth in the existing 
estate, to motivate our employees. Vesting for on-target performance (i.e. 
the achievement of target budget) will remain at 50% of maximum and in 
line with our previous target-setting approach, maximum performance will 
demand high growth delivery from the management team. 

Review of performance metrics for variable pay
Alongside the policy review we also took this opportunity to review the 
current performance metrics for both the annual bonus plan and Long Term 
Incentive Plan for the Executive Directors.
Annual bonus plan
The bonus will continue to be based on quantifiable financial measures. 
The Committee proposes to replace CROCCE with FCF and adjust the 
weighting as follows:

Current bonus measures

67% PBT
33% CROCCE

Proposed bonus measures

60% PBT
40% FCF

The Committee aims for internal alignment and consistency in reward; 
cascading the principles at Board level down through the organisation 
where possible, is one of our key principles. CROCCE, a complex measure, 
has been used in our variable pay plans to limited effect and participants in 
our senior leadership incentive scheme, other than our Executive Directors, 
find it difficult to relate to day-to-day decision-making. As we pursue organic 
growth and a reduction in debt, rewarding management on Group profit 
before tax and FCF ensures simplicity, visibility of progress and focus. 
Long Term Incentive Plan
As noted above, one of our primary objectives is to deliver a reward 
structure which is as consistent as possible across the business, including 
the performance metrics in our variable pay plans, whilst also ensuring that 
our measures best support our strategy. Our LTIP has been based on FCF, 
CROCCE and relative TSR.

Following extensive discussions, the Committee has determined that changing 
two of the performance measures will improve the relevance and quality of our 
LTIP for all participants. We recognise that many of our shareholders like to see 
an external return measure as a balance to internal ones; we therefore plan 
to retain the relative TSR measure at its current weighting of 20% of maximum. 
We propose to change the other two measures as shown below:

Current LTIP measures
20% relative TSR against the 
FTSE 250 Index excluding 
Investment Trusts
40% CROCCE
40% FCF

Proposed LTIP measures
20% relative TSR against the 
FTSE 250 Index excluding 
Investment Trusts
40% underlying EPS
40% net cash flow (‘NCF’)

As we focus on earnings growth and a reduction in debt, we expect to 
continue to deliver strong TSR growth to our shareholders. These three 
elements are captured in underlying EPS, NCF and relative TSR. For relative 
TSR, upper quartile performance will be required for 100% of the element 
to vest, previously upper quintile performance was required for 100% 
of the element to vest. Rather than seeking to increase the maximum LTIP 
opportunity, we believe setting maximum performance of the relative TSR 
element at upper quartile performance will provide a fair and equitable 
LTIP opportunity for delivering strong performance. Further detail on each 
measure is set out in the Annual Report on Remuneration on pages 66 to 72.

Across all of these measures the Committee retains a broad business 
performance underpin and more general discretion under the plan rules 
and the policy to reduce the vesting outcome if it considers that the formulaic 
outcome is inappropriate.

The 2018 UK Corporate Governance Code
The 2018 Code applies to the Company from the start of the 2019/20 
financial period and we will report on compliance with the 2018 Code in 
our 2020 Annual Report and Accounts. Our current policy is compliant with 
existing requirements, for example, the Committee has discretion to override 
formulaic outcomes and holding periods for shares that already form part of 
the incentive scheme arrangements. During the policy review in 2018/19, 
the Committee considered the elements introduced in the 2018 Code thus 
ensuring that the new policy remains compliant. This includes the introduction 
of a formal policy for post-employment shareholding requirements, changes 
to the pension contribution rates for new hires at Executive Director level 
and the enhancement of malus and clawback provisions within our incentive 
schemes. We have also updated our Terms of Reference to reflect the wider 
remit of the Committee.
How the Committee addressed the factors in Provision 40 
of the 2018 Code when determining the new policy
•  Clarity – remuneration arrangements are transparent and competitive; 

the outcomes of variable elements are dependent on the achievement of 
performance measures aligned with our stated strategy and the interests 
of all stakeholders. Performance targets are set in line with Group budgets 
and plans and reviewed and tested by the Committee. Executive Directors 
are required to build meaningful personal shareholdings in the Company, 
this is monitored by the Committee.

•  Simplicity – we follow a standard UK market approach to remuneration 
with established variable incentive schemes that operate on a clear and 
consistent basis. The measures we have introduced are used to monitor 
business performance, support the operation of the business and are 
reviewed regularly by management.

•  Risk – the new policy includes the following:

™ Limits are set on the maximum incentive scheme awards that can 

™

be granted;

™ Alignment of performance measures with our strategy;

™

™

™ The LTIP incentivises Executive Directors to deliver against strategy over 
the longer term. Long-term performance measures and share-based 
remuneration support the creation of sustainable shareholder value.

™

™ The Committee has discretion to override formulaic outcomes which 
may not accurately reflect the underlying performance of the Group. 
Malus and clawback provisions in the incentive scheme rules also 
provide flexibility to adjust payments.

™ Introduction of a post-employment shareholding guideline, as discussed 

™

further on page 71.

•  Predictability – detailed information on the potential values that may be 
earned through the incentive plans is provided in the policy document (set 
out on pages 57 to 64) and the Risk section above refers to limits and 
Committee discretion.

•  Proportionality – the performance metrics for both incentive plans are 
clearly aligned to strategy and are designed to reward the successful 
execution of that strategy over a long-term performance period. 
Outcomes are tested in the context of underlying Group performance, 
the broader economic environment and the wider workforce, ensuring that 
poor performance cannot be rewarded.

•  Alignment to culture – in determining the policy, the Committee was 
clear that it should drive the right behaviours, reflect our values and 
support our Group purpose and strategy. Our culture encourages high 
performance and supports sustainable growth. The Committee will review 
the remuneration framework regularly to ensure it continues to support 
our strategy.

Marston’s PLC Annual Report and Accounts 2019Governance56

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.

•  2019 bonus outturn and 2015/16 and 2016/17 LTIP award vesting, 

as outlined above.

•  Bonus scheme for senior management.
•  Approval of SAYE and LTIP grants.
•  Review of Executive Directors and senior management shareholdings 

in the Company, in the context of shareholding guidelines.

•  Implementation of the remuneration aspects of the 2018 UK Code.

Looking forward to 2019/20
Pay award effective 1 October 2019
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 Chairman and other Non-executive Directors fees were last reviewed in 
2017/18 and no changes will be made for 2019/20. The next review will 
be in line with the usual timetable as set out in the policy.

As discussed above, the CEO has volunteered to reduce his pension 
provision to 20% of salary, effective from the start of 2019/20.

Incentive remuneration for 2019/20
As outlined above, no changes in quantum are proposed in respect of the 
Executive Directors’ annual bonus plan and LTIP for 2019/20 but the revised 
performance metrics will apply for the forthcoming financial period. 

Committee focus for 2019/20
The Committee will monitor the implementation of the proposed policy, 
in particular the change to performance metrics, to ensure our incentive 
schemes remain aligned with strategy and provide the right balance of 
challenge and reward. The Company 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. 
The Committee will continue to review developing market practice and 
emerging trends with regards to aligning pension contributions with the 
wider workforce.

Shareholder engagement
The Committee remains committed to ongoing shareholder dialogue and 
takes an active interest in voting outcomes. We are delighted again, that the 
2018 Annual Report on Remuneration received high levels of support, with 
over 99% of votes cast in favour of the resolution. We welcome feedback 
from our shareholders as it helps inform our thinking on remuneration matters.

As part of the preparation of the 2020 policy that we are proposing to 
shareholders, the Committee consulted with major shareholders in July and 
August this year, as well as the institutional investor bodies, on the proposed 
changes to the policy and setting out the thinking behind these proposals. 
We are grateful for the responses received, which were overall supportive. 
Having considered the responses and adjusted the proposed policy for 
the CEO pension as discussed on page 66, we believe that the proposed 
policy should not be adjusted further but we have undertaken to monitor 
certain areas as best practice develops following the full implementation 
of the 2018 Code.

Finally, I would like to take this opportunity to say that I have thoroughly 
enjoyed serving on the Board and Remuneration Committee of Marston’s 
PLC for the last five years. I am confident that the proposed policy is aligned 
with shareholder interests and will continue to support the delivery of 
Marston’s strategic objectives and the creation of sustainable shareholder 
value. I will hand over the chairmanship of the Remuneration Committee 
to Octavia Morley at the end of the 2020 AGM, safe in the knowledge 
that she will continue the responsible approach to remuneration for which 
Marston’s is known for.

Catherine Glickman
Chairman of the Remuneration Committee

Membership
Catherine Glickman (Chairman)
Carolyn Bradley
Bridget Lea (from 1 September 2019)
Robin Rowland (until 31 July 2019)
Octavia Morley will join the Committee from 1 January 2020

Our responsibilities
•  Determining the framework and policy for Executive Directors’ 

remuneration.

•  Within that framework, setting the remuneration for the Executive 
Directors and other members of the PLC Executive Committee 
(including the Group Secretary). 
•  Setting the Chairman’s remuneration. 
•  Approve the design and pay-outs of annual and long-term 

incentives awards. 

•  To 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. The Group Secretary, Anne-Marie Brennan, and the Group 
HR Director, Liam Powell, also attend each meeting and provide 
advice to the Committee.

No person is in attendance for any discussions regarding their 
own remuneration.

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 its Code of Conduct in relation to executive remuneration 
consulting in the UK. Deloitte received fees amounting to £33,710 
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.

We will continue to engage with our shareholders 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 24 January 2020.

Terms of reference
The Committee has considered the requirements of the 2018 Code and 
agreed a number of changes to be made to its terms of reference, as 
part of the annual review. Full terms of reference can be found in the 
Investors section of the Company’s website www.marstons.co.uk

Marston’s PLC Annual Report and Accounts 2019Remuneration Policy

57

This part of the report sets out the Directors’ Remuneration Policy, which will be subject to a binding vote at the 2020 AGM and take effect from the close of the 
meeting. The policy is determined by the Company’s Remuneration Committee (‘the Committee’). References in this policy to Executive Directors include both 
Executive Directors and any other person who is required to be treated as an Executive Director under the applicable legislation. 

No significant changes have been made to the policy approved at the 2017 AGM. However, certain amendments have been made to take account of 
developments since the 2017 AGM, including aligning the policy to our updated strategy and our response to the 2018 UK Corporate Governance Code. 
This is to ensure the policy remains appropriate for the Company going forward. A summary of the changes made to the proposed policy as compared to the 
policy approved at the 2017 AGM are as set out in the Annual Statement from the Committee Chairman.

Aims
The policy is designed to ensure that Executive Directors are provided with sufficient remuneration to motivate each individual with incentives that are aligned 
to strategy and encourage enhanced performance. The Committee believes that variable pay should only be earned for achievement against stretching 
targets and will continue to ensure that targets provide an appropriate balance between motivating and rewarding Executive Directors to deliver stretching 
but sustainable performance, without encouraging excessive risk taking.

Base salary

Purpose and link 
to strategy

Operation

Opportunity

Core element of fixed remuneration, reflecting the individual’s role and experience.

Usually reviewed annually and fixed for 12 months commencing 1 October. 

Whilst Executive Directors are contractually entitled to an annual review of their salary, there is no entitlement to an increase 
as a result of this review.

Salary levels are determined by the Committee taking into account a range of factors including:

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

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

•  increase in scope and responsibility;
•  development and performance in the role (including if a newly appointed Executive Director’s salary is positioned below 
a market rate that it may be increased to a market rate over such period as the Committee considers appropriate); or

•  a salary falling significantly below market positioning.

Performance metrics

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

Marston’s PLC Annual Report and Accounts 2019Governance58

Remuneration Policy continued

Benefits

Purpose and link 
to strategy

Ensures the overall package is competitive.

Participation in the Save As You Earn scheme (SAYE) creates staff alignment with the Group and promotes a sense 
of ownership.

Operation

Executive Directors receive benefits in line with market practice which include a car allowance, private medical insurance 
and life assurance.

The SAYE is an HMRC tax qualifying monthly savings scheme facilitating the purchase of shares at a discount.

Other benefits may be provided based on the role and individual circumstances. These may include, for example, relocation 
and travel allowances.

Opportunity

Set at a level which the Committee considers appropriate against the market and provides a sufficient level of benefit based 
on individual circumstances.

SAYE contribution and operation of the SAYE scheme as permitted in accordance with the relevant tax legislation.

Performance metrics

Not applicable.

Annual Bonus and Deferred Bonus Plan (‘DBP’)

Purpose and link 
to strategy

Operation

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.

Performance measures and applicable targets are set annually and any payout is determined by the Committee after the 
period end, based on performance. The Committee has discretion to vary the bonus payout should any formulaic output not 
reflect the Committee’s assessment of overall business performance or not be appropriate in the context of circumstances 
that were unexpected or unforeseen at the start of the bonus year.

Any bonus earned in excess of 40% of the maximum award is usually payable in shares in the Company which will be 
deferred for a period of three years. Executive Directors can opt to defer a greater proportion if they wish. Deferral of any 
bonus earned is subject to a de minimis limit of £5,000.

As with all Group bonuses, they remain discretionary and can be adjusted or removed at the Committee’s discretion. 

At its discretion, the Committee may award dividend equivalents to reflect dividends that would have been paid over the 
period from grant to vesting on vested shares under the DBP. These dividend equivalents may be calculated assuming the 
reinvestment of dividends in the Company’s shares on a cumulative basis.

Recovery provisions apply, as referred to below.

Opportunity

The usual maximum annual bonus opportunity is 100% of base salary.

Performance metrics

Performance measures are determined each year reflecting the business priorities that underpin Group strategy.

At least 50% of the award will be based on financial performance measures aligned to the Group’s financial key 
performance indicators, which may include Group profit, return on capital and cash measures. The balance of the bonus 
opportunity will be based on financial measures and/or the delivery of strategic/individual objectives.

Financial measures
Subject to the Committee’s discretion to override formulaic outturns, payment at threshold is up to 20% of the maximum, up to 50% 
of the maximum will be payable for on-target performance and all the bonus will be payable for maximum performance. 

There is usually straight-line vesting between the threshold and target performance levels and between target and maximum 
performance levels.

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

Non-financial strategic or individual measures
Subject to the Committee’s discretion to override formulaic outturns, a non-financial strategic or individual measure 
will vest between 0% and 100% based on the Committee’s assessment of the extent to which the relevant measure has 
been achieved.

Marston’s PLC Annual Report and Accounts 201959

Long Term Incentive Plan (‘LTIP’)

Purpose and link 
to strategy

Operation

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.

The Committee makes long-term incentive awards under the 2014 LTIP which was approved by shareholders at the 
2014 AGM.

Under the 2014 LTIP, awards of conditional shares, restricted stock or nil cost options can be made with vesting dependent 
on the achievement of performance conditions, normally over a three-year performance period. Vested awards are 
normally subject to an additional holding period of two years before being released to participants.

The Committee has discretion to vary the formulaic vesting output applying to any LTIP award where it believes the outcome 
does not reflect the Committee’s assessment of overall business performance or is not appropriate in the context of 
circumstances that were unexpected or unforeseen at the date of grant. This discretion does not apply to any tax-qualifying 
option granted as part of an Approved Performance Share Plan (APSP) award as described below where such discretion 
would not be permitted in accordance with the applicable tax legislation. 

The Committee may at its discretion structure awards as APSP awards. APSP awards enable the participant and Company 
to benefit from HMRC approved option tax treatment in respect of part of the award, without increasing the pre-tax value 
delivered to participants. APSP awards may be structured either as a tax-qualifying option for the part of the award up to the 
HMRC limit (currently £30,000) with an unapproved option for the balance and a ‘linked award’ to fund the exercise price 
of the tax-qualifying option, or as a tax-qualifying option and an LTIP award, with the vesting of the LTIP award scaled back 
to take account of any gain made on exercise of the tax-qualifying option. 

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 (i.e. the date on which the awards 
become exercisable). These dividend equivalents may assume the reinvestment of dividends.

Recovery provisions apply as referred to below.

Opportunity

The normal maximum award size will be up to 150% of base salary in respect of any financial year. Awards for 2019/20 
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.

In exceptional circumstances the Committee reserves the right to award up to 200% of base salary in respect of any 
financial year.

These limits do not include the value of shares subject to any tax-qualifying option granted as part of an APSP award.

Performance metrics

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

The performance measures are reviewed regularly to ensure they remain relevant but will be based on financial measures 
and/or share price growth related measures, aligned to the Group’s long-term strategy, which may include but not be 
limited to:

•  net cash flow;
•  underlying earnings per share; and
•  relative total shareholder return.

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

Subject to the Committee’s discretion to override formulaic outturns, for the achievement of threshold performance 
no more than 25% of each respective element of the award will vest, rising to 100% vesting for the achievement of 
maximum performance.

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

Marston’s PLC Annual Report and Accounts 2019Governance60

Remuneration Policy continued

Retirement benefits

Purpose and link 
to strategy

Operation

Provide a competitive means of saving to deliver appropriate income in retirement.

Executive Directors are eligible to participate in the defined contribution pension scheme (or such other pension plan as may 
be deemed appropriate) and, if a member before closure of the scheme, the defined benefit scheme.

The defined benefit scheme was closed to new entrants from 29 September 1997. Executive Directors who are members of 
the closed scheme can continue to receive benefits in accordance with the terms of this scheme.

In appropriate circumstances, Executive Directors may take a salary supplement instead of contributions into a pension plan.

Opportunity

All current Executive Directors may receive contributions of up to 20% of base salary under the defined contribution pension 
scheme, an equivalent cash allowance or a combination of the two (up to 20% of base salary). 

Pension contributions (or cash allowance) for any Executive Director appointed after the date on which this policy takes 
effect will not exceed the pension contributions available to the majority of those employees who participate in the 
Company’s Group Personal Pension Plan (which is currently 7% of salary).

Active members of the defined benefit pension scheme continued to accrue benefits under this scheme until 30 September 2014.

Performance metrics

Not applicable.

Recovery provisions (malus and clawback)
Annual bonus awards and LTIP awards granted on or after 1 October 2019 are subject to recovery provisions which may be applied for up to two years 
following the payment in the case of a cash bonus, until the vesting date in the case of a Deferred Bonus award, and for up to two years following vesting 
in the case of an LTIP award. These provisions may be applied in the following circumstances:

•  a material misstatement of any Group company’s financial results;
•  a material failure of risk management;
•  serious reputational damage;
•  serious misconduct or material error on the part of the participant;
•  an error in assessing a performance condition applicable to the bonus or LTIP award;
•  corporate failure; and
•  in the case of recovery before vesting, other relevant circumstances at the discretion of the Committee.

Malus and clawback may be applied to any tax-qualifying option granted under the LTIP to the extent permitted by the applicable tax legislation.

Non-executive Director fees

Purpose and link 
to strategy

Operation

Non-executive Director fees are set at a level that reflects market conditions and is sufficient to attract individuals with 
appropriate knowledge and experience.

Fees are usually reviewed every two years and amended to reflect market positioning and any change in responsibilities.

The Committee recommends the remuneration of the Chairman to the Board. Fees paid to Non-executive Directors are 
determined and approved by the Board as a whole.

The Non-executive Directors do not participate in the annual bonus plan or any of the Group’s share incentive plans. 
Non-executive Directors may be eligible to receive benefits such as the use of secretarial support, travel costs or other 
benefits that may be appropriate.

Opportunity

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 or holding the position of Non-executive Director responsible 
for employee engagement).

Performance metrics

Not applicable.

Marston’s PLC Annual Report and Accounts 201961

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

(i) before the policy came into effect (and, in the case of the terms of a payment agreed on or after 5 October 2014, were in line with the policy applying at 

the date of agreement); or 

(ii) at a time when the relevant individual was not a Director of the Company (or other person to whom this policy applies) and, in the opinion of the Committee, 

the payment was not in consideration for the individual becoming a Director of the Company (or other such person). 

For these purposes the term payments includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of 
the payment are agreed at the time the award is granted.

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

The annual bonus performance targets reflect key financial objectives of the Group and reward for delivery against these. For 2019/20, the bonus opportunity 
will be based on underlying profit before tax (60% of the award) and free cash flow (40% of the award). 

The LTIP performance targets reflect the Group’s strategic objectives and therefore the financial and strategic decisions which ultimately determine the success 
of the Group. The LTIP performance measures are based on financial measures and/or share price growth related measures to provide alignment with the 
Group’s strategy. For 2019/20, the LTIP opportunity will be based on underlying earnings per share (40% of the award), net cash flow (40% of the award) 
and total shareholder return (20% of the award).

The Committee retains the discretion to adjust or set different performance measures or targets if events occur (such as a change in strategy, a material 
acquisition and/or a divestment of a Group business or a change in prevailing market conditions) which cause the Committee to determine that the measures 
are no longer appropriate and that amendment is required so that they achieve their original purpose.

Operation of share plans
The Committee may amend the terms of awards and options under its share plans in accordance with the plan rules in the event of a variation of the 
Company’s share capital or a demerger, special dividend or other similar event or otherwise in accordance with the rules of those plans. Shares awards 
granted under any such plan may be settled (in whole or in part) in cash although the Committee would only do so where the particular circumstances made 
it appropriate to do so – for example, where there is a regulatory restriction on the delivery of shares.

Illustration of application of Remuneration Policy
The charts on the following page show the relative split of remuneration between fixed pay (base salary, benefits and pension) and variable pay (annual 
bonus, DBP and LTIP) for each Executive Director on the basis of minimum remuneration, remuneration receivable for performance in line with the Company’s 
expectations and maximum remuneration (including and excluding share price appreciation of 50% on the LTIP award).

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

Fixed pay

Annual bonus and DBP

LTIP

Minimum performance

Performance in line with expectations

Maximum performance

Maximum performance with share 
price appreciation of 50%

Fixed elements of remuneration are 
base salary, benefits and pension

Base salary is the latest known 
salary (i.e. the salary effective from 
1 October 2019) and the value for 
benefits has been assumed to be 
equivalent to that included in the 
single figure calculation on page 66

Employer pension contributions at 
an assumed rate of 20% based on 
latest known salary

No bonus

No LTIP vesting

50% of salary delivered for achieving
target performance

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

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

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

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

100% of award vesting (125% of 
salary) for achieving the most stretching 
level of performance measures 
attached to the LTIP awards, plus share 
price appreciation of 50%.

Awards under the LTIP and deferred shares vesting under the DBP ignore any dividend equivalents that may be awarded.

Marston’s PLC Annual Report and Accounts 2019Governance62

Remuneration Policy continued

Ralph Findlay

Andrew Andrea

£2,600

£1,950

£1,300

£650

£0

£708k

100%

£1.2m

16%
24%

60%

£2.0m

36%

29%

35%

£2.4m

46%

24%

30%

Minimium
performance

Performance 
in line with 
expectations

Maximum 
performance

Maximum 
performance 
(with 50% share 
price increase)

)
0
0
0
£
(
n
o

i
t

a
r
e
n
u
m
e
r

l

t

a
o
T

£2,000

£1,500

£1,000

£500

£0

£477k

100%

£790k

16%
24%

60%

£1.3m

36%

29%

35%

£1.6m

46%

24%

30%

Minimum
performance

Performance 
in line with 
expectations

Maximum 
performance

Maximum 
performance 
(with 50% share 
price increase)

)
0
0
0
£
(
n
o

i
t

a
r
e
n
u
m
e
r

l

t

a
o
T

Base salary, benefits and pension

Annual bonus

LTIP

Base salary, benefits and pension

Annual bonus

LTIP

Differences in policy from the wider employee population
The Company aims to provide a remuneration package that is market competitive, complies with any statutory requirements and is applied fairly and equitably 
across the wider employee population. Where remuneration is not determined by statutory regulation, the Company operates the same core principles as it 
does for Executive Directors namely:

•  we remunerate people in a manner that allows for stability of the business and the opportunity for sustainable long-term growth.
•  we seek to remunerate fairly and consistently for each role with due regard to the marketplace, internal consistency and the Group’s ability to pay.

With the exception of a small number of specific operational teams and below Board members of the PLC Executive Committee, all bonus arrangements within 
the Group normally have the same structure and payout mechanism as those for Executive Directors.

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

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

•  Base salary will be set at a level appropriate to the role and experience of the Executive Director being appointed. This may include agreement on future 

increases up to a market rate, in line with experience and/or responsibilities and subject to good performance, where it is considered appropriate. 

•  Pension and benefits will be provided in line with the policy. 
•  The Committee will not offer non-performance related incentives (for example a ‘guaranteed sign-on bonus’). 
•  The circumstances in which other elements may be offered include:

™ an interim appointment being made to fill an Executive Director role on a short-term basis; 

™

™ if exceptional circumstances require that the Chairman or a Non-executive Director takes on an executive function on a short-term basis.

™

™

™ if an Executive Director is recruited at a time in the year when it would be inappropriate to provide a bonus or long-term incentive award for that year as 
there would not be sufficient time to assess performance. Subject to the limit on variable remuneration, the quantum in respect of the months employed 
during the year may be transferred to the subsequent year so that reward is provided on a fair and appropriate basis.

•  The Committee may also alter the performance measures, performance period and vesting period and holding period of the annual bonus, DBP or LTIP, 
if the Committee determines that the circumstances of the recruitment merit such alteration. The rationale will be clearly explained in the following year’s 
Directors’ Remuneration Report.

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

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

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

The maximum level of variable remuneration which may be granted (excluding buy-out arrangements) is 300% of salary. The Committee will ensure that such 
awards are linked to the achievement of appropriate and challenging performance measures and will be forfeited if performance or continued employment 
conditions are not met.

Marston’s PLC Annual Report and Accounts 2019 
 
 
 
63

Non-executive Directors
Fees payable to a newly-appointed Chairman or Non-executive Director will be in line with the fee policy in place at the time of appointment.

Service contracts and policy on payment for loss of office
Executive Directors’ contracts are on a rolling 12 month basis and are subject to 12 months’ notice when terminated by the Company and six months’ notice 
when terminated by the Director. 

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

Name

Commencement date

Unexpired term remaining as at 28 September 2019

Andrew Andrea
Ralph Findlay
Carolyn Bradley
Catherine Glickman
Bridget Lea
Mathew Roberts
William Rucker

31 March 2009
15 August 2001
1 October 2014
1 December 2014
1 September 2019
1 March 2017
1 October 2018

Terminable on 12 months’ notice.
Terminable on 12 months’ notice.
Fixed term expiring on 30 September 2020 (subject to renewal) and terminable on one month’s notice.
Fixed term expiring on 30 November 2020 (subject to renewal) and terminable on one month’s notice.
Fixed term expiring on 31 August 2022 (subject to renewal) and terminable on one month’s notice.
Fixed term expiring on 24 January 2020 (subject to renewal) and terminable on one month’s notice.
Fixed term expiring on 30 September 2021 (subject to renewal) and terminable on one month’s notice.

Further details on current serving Directors’ service contracts and letters of appointment are available at www.marstons.co.uk in the Investors section.

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

Provision

Treatment upon loss of office

Payment in lieu of notice

Payments to Executive Directors upon termination of their contracts will be equal to base salary plus the value of core benefits 
for the duration of the notional notice period. 

Annual bonus

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

This will be at the discretion of the Committee on an individual basis and the decision whether or not to award a bonus in full 
or in part will be dependent upon a number of factors including the circumstances of their departure and their contribution to 
the business during the bonus period in question. Any bonus amounts paid (as estimated by the Committee) will typically be 
pro-rated for time in service to termination and will, subject to performance, be paid at the usual time, although the Committee 
retains discretion to pay the bonus award earlier in appropriate circumstances. Any bonus earned for the year of departure 
and the preceding year may be paid wholly in cash, with no deferral.

Deferred bonus

The treatment of any award under the DBP will be determined based on the leaver provisions contained within the DBP rules.

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

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

Where an award vests, it will ordinarily vest at the originally anticipated vesting date, although the Committee has discretion 
to accelerate vesting to the date of cessation in appropriate circumstances.

2014 LTIP

The treatment of any award under the 2014 LTIP would be determined based on the leaver provisions contained within the 
2014 LTIP plan rules.

For ‘good leavers’ unvested LTIP awards will usually be released at the ordinary release date (i.e. following the end of the 
holding period), although the Committee retains discretion to release awards earlier (for example following the end of 
the performance period or at the date of cessation) in appropriate circumstances. The vesting of awards is subject to the 
performance conditions and, unless the Committee determines otherwise, pro-rating for time to reflect the proportion of 
the performance period that has elapsed. ‘Good leavers’ are participants who leave as a result of death, ill-health, injury 
or disability, the sale of their employer out of the Group or any other reason at the discretion of the Committee. In other 
circumstances, unvested LTIP awards will lapse upon the cessation of employment.

If a participant leaves for any reason (other than summary dismissal) after an award has vested but before it has been 
released (for example, during a holding period), the award will ordinarily continue to the normal release date when it 
will be released to the extent it vested. The Committee retains discretion to release awards at the date of cessation in 
appropriate circumstances.

Marston’s PLC Annual Report and Accounts 2019Governance64

Remuneration Policy continued

Provision

Treatment upon loss of office

Change of control

Mitigation

Other payments

Upon a change of control incentive awards will usually vest and be subject to performance conditions. Pro-rating for time, to 
reflect the proportion of the performance period that has elapsed will ordinarily apply to LTIP awards. The Committee retains 
the discretion to waive pro-rating for time. Awards may vest on a similar basis on the occurrence of any other relevant event.

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

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

Payments may be made in the event of loss of office under the SAYE scheme (which is governed by its rules and the applicable 
tax legislation and does not provide for discretionary treatment). The Committee reserves the right to make any other payments 
in connection with a Director’s cessation of office or employment where the payments are made in good faith in discharge of 
an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement of any claim 
arising in connection with the cessation of a Director’s office or employment. Any such payments may include but are not 
limited to payments in respect of accrued holiday pay, outplacement and legal fees and other relevant benefits.

Further details on current serving Directors’ service contracts and letters of appointment are available at www.marstons.co.uk in the Investors section.

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

In October of each year a paper is submitted to the Committee by the Group HR Director summarising the outcome of any annual reviews made to the 
wider workforce (which includes all employees except for the majority of pub-based employees who have their remuneration rate set by statute rather than 
the market). This paper is taken into account when setting Executive Directors’ remuneration effective from the start of October for the following 12 months. 
In addition, and where relevant, a similar paper is submitted in October covering the decisions taken by the PLC Executive Committee relating to bonus 
payments for employees within the wider workforce. This is taken into consideration by the Committee when approving bonus awards for Executive Directors.

Our annual engagement survey reaches all of our employees and our first workforce engagement sessions, each of which will be attended by a Non-
executive Director, are currently planned to take place during 2020.

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

Shareholding guidelines
In order to further align the interests of Executive Directors with those of shareholders, the Committee applies shareholding guidelines. These guidelines provide 
that each Executive Director is required to hold shares with a value equal to two times 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).

Following employment, Executive Directors are required to retain in their first year post-employment such number of their ‘relevant shares’ as they held at 
the date of cessation of employment, up to a maximum of the number of shares they were required to hold during employment. In their second year post-
employment they are required to retain such number of their ‘relevant shares’ up to a maximum of 50% of the shares they were required to hold during 
employment. For these purposes, ‘relevant shares’ do not include any shares purchased by the Executive Director, or acquired by the Executive Director 
as a result of a share plan award granted in respect of a financial year before 2019/20.

Marston’s PLC Annual Report and Accounts 2019Remuneration Summary 2019

65

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 (current Policy)

Implementation in 2018/19

2019

2020

2021

2022 2023 2024

Basic salary 
and core 
benefits

Annual  
bonus

Deferred  
element 
of bonus

Long Term 
Incentive 
Plan (LTIP)

Share 
ownership  
policy

Outcomes

Andrew Andrea

Ralph Findlay

Reflects scope of the role; to recruit and retain 
calibre required; and reviewed in context of 
wider Group

Maximum 100% of salary

Committee discretion

Clawback provisions apply for up to two years
Payments in excess of 40% of maximum usually 
deferred into shares

Malus provisions apply for up to three years
Maximum annual award is 150% of salary

Normal maximum is 125% of salary

Malus and clawback provisions apply for 
up to two years

200% of salary for CEO

2% increase in salary in 2019 in line with the average 
salary increases across the Group

Benefits package unchanged
0% bonus awarded reflecting performance against 
targets as described on page 67

No bonus awarded so no deferral into shares

11.2% of the 2016/17 LTIP maximum met the 
performance conditions and were due to vest. However, 
the Executive Directors have waived their rights to 
the award

Awards of 125% of salary granted during the period
316% of salary for Ralph Findlay, CEO

100% of salary for other Executive Directors

118% of salary for Andrew Andrea, CFO

2019
2018
2019
2018

Fixed
Basic salary, core benefits 
and pension

£486,061
£459,085
£722,432
£708,523

Variable
Annual bonus

£0
£65,536
£0
£97,852

Long-term incentives
£01
£0
£01
£1,2902

Total
£468,061
£524,621
£722,432
£807,665

1. 11.2% of the 2016/17 LTIP maximum met the performance conditions and were due to vest. However, the Executive Directors have waived their rights to this award.

2. The long-term incentive figure for 2018, for Ralph Findlay, relates to the grant of SAYE option.

How we performed against our objectives
Annual bonus for 2018/19

Performance metric
Underlying Group 
profit before taxation

Return on capital

Bonus

Link to strategy
These measures reflect the 
Group’s business priorities 
that underpin our strategy 
during the year

LTIP vesting in 2018/19 (2016/17 LTIP Award)

Performance metric
CROCCE
Free cash flow

Relative TSR

Link to strategy
These reflect the sum 
total of our strategy 
and ultimately 
determine the success 
of the Group during 
the year

Weighting

Threshold

Target

Maximum

Actual

% of salary

67%

£104.0m

£107.5m

£111.0m

£101.0m

33%

10.5%

10.9%

11.3%

10.4%

Weighting
40%
40%

Base

Threshold
10.5% Base+0.25%
Base+7.5%

£300m

On-target 
50% vesting
Base+0.5%
Base+15.0%

Maximum 
100% vesting
Base+1.0%
Base+30.0%

Actual
10.4%
£325.2m

20%

–

Median

–

Upper 
quintile

Below 
median

0%

0%

0%

LTIP vesting 
% of max
0%
11.2%1

0%

1. 11.2% of the 2016/17 LTIP maximum met the performance conditions and were due to vest. However, the Executive Directors have waived their rights to this award.

Marston’s PLC Annual Report and Accounts 2019Governance66

Annual Report on Remuneration

This part of the Directors’ Remuneration Report sets out how we have implemented our current remuneration policy during the period ended 
28 September 2019.

Executive Directors
Single total figure of remuneration (audited)

Period ended 28 September 2019
Andrew Andrea
Ralph Findlay

Period ended 29 September 2018
Andrew Andrea
Ralph Findlay

Salary
£
377,670
563,900

Salary 
£
370,260
552,840

Benefits
£
14,857
17,557

Benefits 
£
14,773
17,473

Bonus
£
0
0

Bonus 
£
65,536
97,852

Long-term 
incentives
£
0
0

Long-term 
incentives1 
£
0
1,290

Pension
£
75,534
140,975

Total
£
468,061
722,432

Pension 
£
74,052
138,210

Total 
£
524,621
807,665

1. The long-term incentives figure for the period ended 29 September 2018, for Ralph Findlay, relates to the grant of SAYE options.

Individual elements of remuneration (audited)
Fixed elements
Base Salary
Base salary was reviewed by the Committee and, for 2019/20, 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:

Period ended 28 September 2019
Andrew Andrea
Ralph Findlay

2019/20 
base salary
£
385,223
575,178

2018/19 
base salary
£
377,670
563,900

Increase
2%
2%

Benefits
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
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.

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 28 September 2019, 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 28 September 2019, Ralph Findlay received a cash supplement of 25% as a salary supplement in lieu of pension contributions. In line with the 
proposed new policy, from the start of the 2019/20 financial year, Ralph Findlay will receive a cash supplement of 20% in lieu of pension contributions.
•  The Committee will continue to review and consider evolving market practice and investor views with regards to the pension arrangements for existing 

Executive Directors recognising that these are contractual rights. For future hires at Executive Director level, pension provision (or cash allowance) will not 
exceed the pension contributions available to the majority of those employees who participate in the Company’s GPPP (a current population of around 
1,800 employees); this is currently 7% of salary.

•  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 30.09.19 
£
117,049

Accrued pension 
at 30.09.18 
£
114,349

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.

Marston’s PLC Annual Report and Accounts 201967

Variable elements
Annual Bonus and Deferred Bonus Plan
With the exception of a small number of specific operational teams, and below Board members of the PLC Executive Committee, 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, 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). 

2018/19 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 on-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 2018/19 are set out below:

2018/19
Underlying Group profit before taxation
Return on capital
Award

Threshold
£104.0m
10.5%1

Target
£107.5m
10.9%

Maximum
£111.0m
11.3%

Actual
£101.0m
10.4%

% of salary
0%
0%
0%

Opportunity
67%
33%
100%

1. The threshold for return on capital is the same as the CROCCE base used for the LTIP performance metric.

2019/20 opportunity
The bonus opportunity for the annual bonus scheme for 2019/20 remains at 100% of salary. However, as detailed in the Annual Statement, CROCCE has 
been replaced as a performance metric by FCF and the weighting of each measure will be adjusted slightly. Underlying Group profit before tax will represent 
60% of the award and FCF 40% of the award.

As detailed in the Annual Statement, up to 20% of potential maximum bonus will be payable for achievement of prior year performance. Given the uncertainty 
in the market and current environment we are facing, we believe that delivering threshold performance year-on-year is becoming progressively more 
demanding, especially in light of our tighter margins from an increasingly competitive market and lowering demand. Vesting for on-target performance (i.e. 
the achievement of target budget) will remain at 50% of maximum and in line with our previous target setting approach, maximum performance will demand 
high growth delivery from the management team. 

The Directors consider that the future Group profit and FCF 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. 

Long Term Incentive Plan
Vesting in respect of performance during 2018/19 (2016/17 LTIP award)
LTIP awards granted in 2016/17 were subject to the achievement of the metrics in the following table. Although the formal vesting date is not until June 2020 
the three year performance period ended on 28 September 2019 and the Committee have reviewed the outturn for each measure. Both CROCCE and 
relative TSR failed to meet threshold performance. However, for the FCF element, the Group achieved £325.2 million which meets the threshold criteria of base 
+7.5% for this measure. The Committee agreed that 11.2% of the maximum award had met the performance conditions and were due to vest, however, given 
the challenging performance in 2018/19 and in recognition that there is no bonus payable under the Group bonus scheme, the current Executive Directors 
have chosen to waive their rights to the award.

CROCCE
FCF

Relative TSR

Weighting
40%
40%

20%

Base
10.5%
£300m

Threshold 
at 25%
Base +0.25%
Base +7.5%

On-target 
50% vesting
Base +0.5%
Base +15%

–

Median

–

Maximum 
100% vesting
Base +1.0%
Base +30%
Upper 
quintile

Actual
10.4%
£325.2m
Below 
median

Vesting
% of max
0%
11.2%1

0%

1. 11.2% of the 2016/17 maximum met the performance conditions and were due to vest. However, the Executive Directors have waived their rights to this award.

•  CROCCE removes any potential distortions from subjective decisions on depreciation policy and asset revaluation. 
•  FCF is set as a three-year cumulative amount. 
•  Relative TSR against the FTSE 250 Index (excluding Investment Trusts), aligns management’s objectives with those of shareholders and is a broad measure 

of the extent to which Group strategy is considered appropriate by the market as well as the extent to which it is being well implemented.

•  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 2015/16 award lapse
The 2018 Directors’ Remuneration Report stated that the performance measures for the 2015/16 LTIP award had not been achieved. Following the formal 
vesting date in June 2019, the Committee has confirmed that the awards have lapsed.

Marston’s PLC Annual Report and Accounts 2019Governance68

Annual Report on Remuneration continued

Granted during 2018/19
LTIP awards granted during 2018/19 were as follows:

2018/19
Andrew Andrea
Ralph Findlay

Percentage of 
salary
125%
125%

Number of shares
473,033
706,287

Face value  
at grant1
£472,087
£704,874

% of award 
vesting at threshold
25%
25%

Performance period

Holding period

Financial periods
2018/19–2020/21

Financial periods
2021/22–2022/23

1. Calculated using the mid-market share price at date of grant of £0.998.

The same performance conditions and targets apply as for previous awards as set out above.

2019/20 awards
It is intended to grant awards under the LTIP in 2019/20 at the level of 125% of salary. As set out in the Annual Statement it is proposed to apply the following 
performance measures and weightings to the plan.

Proposed LTIP measures
20% relative TSR against the FTSE 250 Index (excluding Investment Trusts)
40% underlying EPS
40% net cash flow (NCF)

The detailed performance metrics and targets are set out below.

•  Relative TSR: TSR remains a performance measure. The Committee did consider moving our comparator group to a bespoke peer group. However, 

after researching different indices and comparator groups, we concluded that this was neither practical nor ultimately of great benefit to either our LTIP 
participants or our shareholders; we are therefore proposing to retain the FTSE 250 Index (excluding Investment Trusts). For median performance 25% of 
this element will vest. Upper quartile performance will be required for 100% of the relative TSR element to vest. Rather than seeking to increase the maximum 
LTIP opportunity we believe setting maximum performance for the relative TSR element at upper quartile performance will provide a fair and equitable LTIP 
opportunity for delivering strong performance. Upper quartile performance for maximum vesting is also in line with market practice (where the overall LTIP 
maximum opportunity is not excessive).

•  EPS: to allay any concerns regarding the use of underlying EPS as a measure, the Committee will ensure that the earnings being used are quality earnings 

with safeguards in place which will include the following:
™ underlying EPS is an adjusted EPS definition which allows the Committee to adjust reported underlying EPS (for example for material acquisitions or 

™

divestments or the impact of new significant changes to accounting such as IFRS 16) to ensure we are reflecting genuine profit improvement;

™ the Committee has discretion to amend the pay-out should any formulaic output not reflect the Committee’s assessment of overall business performance;

™

™ malus and clawback triggers are in place and as there is a two year holding period on the LTIP, this makes those provisions easier to apply in practice.

™

•  NCF: net cash flow is as close a measure to debt reduction as we consider appropriate. The Committee wants to ensure that we encourage management 
to maximise cash available for debt reduction but, if there is an opportunity to use that cash in a more efficient way than paying down debt, for example 
an acquisition, we do not want to penalise management for what may be a better decision for the Group and all our stakeholders, and which would be 
reflected in share price and therefore our TSR performance. The Committee will have safeguards in place to ensure that there are no other unintended 
consequences of this measure, for example, underinvestment in our properties, and the link to earnings will also help to ensure that our capital expenditure 
investment strategy is delivered or we will see a consequential fall in income.

•  Across all of these measures the Committee retains a broad business performance underpin and more general discretion under the plan rules and the policy, 

to reduce the vesting outcome if it considers that the formulaic outcome is inappropriate.

Underlying EPS¹
NCF
TSR v FTSE 250 (excluding Investment Trusts)

Weighting
40%
40%
20%

Threshold at 25%
12.7p
£100m
Median

On-target 50% vesting
13.1p
£125m
–

Maximum 100% vesting
13.9p
£150m
Upper quartile

1. During the performance period the implementation of IFRS 16 ‘Leases’ will have an impact, hence EPS targets are lower than the current year figure.

Straight-line vesting applies between threshold, on-target and maximum performance.

Marston’s PLC Annual Report and Accounts 201969

Non-executive Directors
Total remuneration (Chairman and Non-executive Directors) (audited)
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).

Carolyn Bradley
Catherine Glickman
Bridget Lea1
Matthew Roberts
William Rucker2

Past Directors
Robin Rowland3

1. Bridget Lea was appointed as a Non-executive Director on 1 September 2019.

2. William Rucker was appointed as Chairman on 1 October 2018.

3. Robin Rowland stepped down from the Board on 31 July 2019.

Base Fee 
£
54,000
54,000
4,500
54,000
200,000

Committee 
Chairman 
£
–
7,500
–
7,500
–

SID 
£
7,500
–
–
–
–

2018/19 Total 
£
61,500
61,500
4,500
61,500
200,000

2017/18 Total 
£
99,833
56,000
–
54,818
–

45,000

–

–

45,000

50,000

Fees
William Rucker was appointed as Chairman of the Board with effect from 1 October 2018 and receives a fee of £200,000 per annum. 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 
2017/18. The fee structure below has applied for Non-executive Directors since 1 October 2018 and will remain unchanged for 2019/20. Fees for both the 
Chairman and Non-executive Directors are next scheduled to be reviewed ahead of the 2020/21 financial period, in line with the usual review timetable.

Basic fee
Additional fee for:
Chairmanship of the Audit Committee
Chairmanship of the Remuneration Committee
Senior Independent Director

£54,000

£7,500
£7,500
£7,500

The maximum authority for Non-executive Directors’ fees (in aggregate), as outlined in our Articles of Association, is £750,000 a year, as approved by 
shareholders at our 2017 AGM.

Interests in ordinary shares (audited)
The beneficial interests of the Non-executive Directors and their connected persons in the share capital of the Company are shown below:

Carolyn Bradley
Catherine Glickman
Bridget Lea1
William Rucker2
Matthew Roberts
Robin Rowland3

1. Bridget Lea was appointed as a Non-executive Director on 1 September 2019.

2. William Rucker was appointed as Chairman on 1 October 2018.

3. Robin Rowland stepped down from the Board on 31 July 2019. His interests in ordinary shares are shown as at that date.

As at 28.09.19
25,000
50,000
–
100,000
25,000
152,219

As at 29.09.18
25,000
50,000
–
–
25,000
152,219

Marston’s PLC Annual Report and Accounts 2019Governance70

Annual Report on Remuneration continued

Payments to past Directors and payment for loss of office (audited)
As disclosed in the 2016/17 Directors Remuneration Report, Peter Dalzell was treated as a ‘good leaver’ for the purpose of his entitlement to vested and 
unvested LTIPs under the 2014 LTIP plan rules and SAYE. As disclosed on page 67, the 2016/17 LTIP has met the performance conditions for vesting at 11.2% of 
maximum in June 2020. A time-prorating percentage of 33% will apply to reflect the proportion of the performance period that elapsed whilst still employed by 
the Group. Details of the award, which will not be released until the ordinary date, are:

2016/17 LTIP

Number of shares
310,751

Performance
% of max
11.2%

Time pro-rating 
percentage
33%

Number of 
shares
11,601

Average 
share price
£1.1894¹

Value of shares
£13,798

1. The value of the LTIP for the year ended 28 September 2019 has been calculated at the average share price for three months ending 28 September 2019.

Total shareholder return chart and CEO remuneration
This graph shows the value, at 28 September 2019, of £100 invested in the Company on 3 October 2009 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 TSR

FTSE All Share TSR

£

350

300

250

200

150

100

50

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

29 September 
2018

28 September 
2019

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.

2018/19
2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10

1. 11.2% of the 2016/17 LTIP maximum met the performance conditions. However, the Executive Directors have waived their rights to this award.

Total 
remuneration 
£
722,432
807,665
803,303
1,008,320
876,788
1,121,294
937,312
815,690
974,784
826,677

Annual 
bonus 
(% of maximum)
0%
17.7%
20%
40%
40%
25%
0%
40%
46%
40%

LTIP  
vesting 
(% of maximum)
0%1
0%
0%
21%
0%
41.9%
44.2%
0%
0%
0%

Marston’s PLC Annual Report and Accounts 201971

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
6.6%
6.6%

Annual bonus1
(100%)
(100%)

1. With the exception of a small number of sales employees within the wider workforce, no bonuses were payable this year based on Group performance.

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.

2018/19
£47.5m
£237.7m

2017/18
£47.5m
£230.6m

% change
–
3.1%

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 £71,750. Andrew Andrea is a Non-executive 
Director of Portmeirion Group Plc and during the year he received fees of £18,300.

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 2019 and the Directors’ Remuneration Policy resolution at the AGM held on 24 January 2017.

Approval of the Annual Report on Remuneration (23 January 2019)
Approval of the Directors’ Remuneration Policy (24 January 2017)

Votes for
87,583,005
80,921,034

% of vote
99.77%
97.88%

Votes against
202,686
1,753,514

% of vote
0.23%
2.12%

Votes withheld
117,751
1,214,429

Supplementary schedules
Shareholding guidelines
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 200% of salary and the Chief Financial Officer is required to hold shares with 
a value equal to 100% of 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).

Under the proposed policy, the minimum shareholding guideline will be increased to 200% of salary for all Executive Directors from the 2019/20 
financial period.

Post-employment shareholding requirement
In line with the 2018 Code, from the 2019/20 financial year, Executive Directors are required to retain in their first year post-employment such number of their 
‘relevant shares’ as they held at the date of cessation of employment, up to a maximum of the number of shares they were required to hold during employment. 
In their second year post-employment they are required to retain such number of their ‘relevant shares’ up to a maximum of 50% of the shares they were 
required to hold during employment. For these purposes, ‘relevant shares’ do not include any shares purchased by the Executive Director, or acquired by the 
Executive Director pursuant to a share plan award granted in respect of a financial year before 2019/20.

Marston’s PLC Annual Report and Accounts 2019Governance72

Annual Report on Remuneration continued

Directors’ share interests (audited)
As at 28 September 2019, 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 28 September 2019

Andrew Andrea
Ralph Findlay

Shares owned outright

At 28.09.19
332,773
1,290,475

At 29.09.18
332,773
1,290,475

Not subject to 
performance
0
20,224

Share options

Subject to 
performance
1,218,242
1,818,968

Target % of 
salary holding
100%
200%

Actual % of 
salary holding
118%
316%

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 28 September 2019

Grant date

Brought forward 
30.09.18

Granted

Exercised/ 
vested

Cancelled/ 
lapsed

Carried forward 
28.09.19

Exercise price £

Vesting date

Release date

Andrew
Andrea

SAYE

LTIP

Ralph
Findlay

SAYE
LTIP

2014
2016
2016
June 2017
December
2017
December
2018

2018
2016
June 2017
December
2017
December
2018

12,396
12,096
278,995
362,709

382,5001

–
–
–
–

–

473,033

20,224
447,572
541,566

571,1151

–
–
–

–

–

706,287

–
–
–
–

–

–

–
–
–

–

–

(12,396)²
(12,096)²
(278,995)
(362,709)3

–
–
–
–

1.21
1.24

2019
2021
2019
2020

–
–
–
–

–

–

382,500

473,033

–
(447,572)
(541,566)3

–

–

20,224
–
–

571,115

706,287

2020

2022

2021

2023

0.89

2021
2019
2020

–
–
–

2020

2022

2021

2023

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.

2. 

On 15 June 2019, Andrew Andrea cancelled his participation in the Company’s 2014 and 2016 Sharesave Scheme offer, these options have subsequently lapsed.

3. As discussed above on page 67, 11.2% of the 2016/17 LTIP maximum met the performance conditions and were due to vest. However, the Executive Directors have waived their rights to this award.

There have been no changes to the Directors’ share interests and interests in share options between 28 September 2019 and 25 November 2019 (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

27 November 2019

Marston’s PLC Annual Report and Accounts 2019Directors’ Report

73

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 76, 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 40, which is 
incorporated in this report by reference.

Directors
Biographies of the Directors currently serving on the Board are set out on 
pages 44 and 45.

Changes to the Board during the period are set out in the Corporate 
Governance Report starting on page 46. Details of Directors’ service 
contracts are set out in the Directors’ Remuneration Report on page 63. 

In accordance with the requirements of the UK Corporate Governance 
Code, all Directors will offer themselves for re-election at the AGM on 
24 January 2020, other than Bridget Lea and Octavia Morley who will 
offer themselves for election following their appointments to the Board, 
and Catherine Glickman who is not standing for re-election.

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 42 and is incorporated into this report by reference.

Research and development
Our category and insights team work with external data providers including 
CGA for on-trade sales and market data; IRI for on-trade data; as well 
as the BBPA, Kantar and IGD. We undertake in-house consumer research 
as well as customer satisfaction studies. The annual Marston’s On- and 
Off-Trade Beer Reports provide an overview of key sector trends as well as 
recommendations to grow beer sales.

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 119. 
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 118 to 119. 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 2019 Annual General 
Meeting (AGM). The Company was also given authority at its 2019 AGM 
to make market purchases of ordinary shares up to a maximum number of 
63,397,461 shares. Similar authority will again be sought from shareholders 
at the 2020 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 46 to 49.

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 
2 July 2019. The Directors recommend a final dividend of 4.8 pence per 
ordinary share to be paid on 27 January 2020 to shareholders on the 
register on 13 December 2019. This would bring the total dividend for 
2018/19 to 7.5 pence per ordinary share (2018: 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 to the financial statements on page 110.

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.

No further notifications have been received by the Company between 
28 September 2019 and 25 November 2019 (being the latest practical 
date prior to the date of this report).

Ordinary shares of 7.375 pence each

Shareholder
Dimensional Fund Advisors LLP
The Capital Group Companies, Inc
Standard Life Aberdeen plc
Brewin Dolphin
Royal London Asset 
Management Limited

As at 28 September 
2019
Voting rights
9,373,005
9,291,379
9,228,860
8,392,337

% of
voting rights
5.00%
4.97%
4.93%
4.94%

Nature of 
interest
Indirect
Indirect
Indirect
Indirect

6,794,023

3.99%

Direct

Marston’s PLC Annual Report and Accounts 2019Governance74

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 N Aston and Mr TA Southall
CGWL Nominees Limited
Mrs H Michels
Mr R Somerville

% of
preference 
share voting rights

45.40%
13.88%
7.33%
5.81%
3.81%
3.74%
3.67%
3.67%

Number

34,048
10,407
5,500
4,356
2,855
2,805
2,750
2,750

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 28 September 2019 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 99.

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/responsibility

Modern Slavery Statement
Our Modern Slavery Act disclosure is available on our website 
www.marstons.co.uk/responsibility

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 
saving 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 three years from 60% to 77%, and we now 
operate as a ‘Zero Waste to Landfill’ business. 

We have operated as a ‘Zero Waste to Landfill’ business now for two years, 
and this year we have further improved our food recycling. Up to 80% of 
our sites with a food offer now recycle their food waste, equating to 4,300 
tonnes a year diverted from landfill.

Total energy emissions decreased by 3.7% this year compared to last. 
Our gas emissions actually increased by 6.7% as a result of activity, but 
our electricity emissions fell by 14.1% as a result of completing various 
energy saving investments including: free air cellar cooling where we have 
cellars above ground, this uses ambient air to cool our cellars rather than air 
conditioning, installation of LED lighting into back-of-house areas, 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

Greenhouse Gas Emissions Intensity Ratio:
CO2e tonnes per £100,000 of turnover

Notes:

2019

CO2e 
tonnes

96,190
13,730
1
4,813
2,719
187

2018

CO2e 
tonnes

100,365
13,788
9
5,179
2,575
215

2019

2018

10.05

10.71

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 30 June 2019, in accordance with the Simplified Energy and 
Carbon Reporting regulation.

Marston’s PLC Annual Report and Accounts 201975

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 112 to 118.

Auditors
Following the audit tender process in 2017, KPMG LLP will succeed 
PricewaterhouseCoopers LLP as the Company’s Independent Auditors from 
the 2019/20 financial year.

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 26 to 
28. In addition, note 25 to the financial statements on pages 112 to 118 
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 85 
to 123 and 124 to 134 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 11:00am on 24 January 2020. 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

27 November 2019

Company registration number: 31461

Marston’s PLC Annual Report and Accounts 2019Governance76

Statement of Directors’ Responsibilities in respect 
of the Financial Statements

The Directors are responsible for preparing the Annual Report 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”, 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 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 also 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 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 position 
and performance, business model and strategy.

Each of the Directors, whose names and functions are listed on pages 44 
and 45 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, 
financial position and loss 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 loss 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 

27 November 2019

Andrew Andrea
Chief Financial and 
Corporate Development Officer

Marston’s PLC Annual Report and Accounts 2019Financial Statements

Marston’s PLC Annual Report and Accounts 2019

77

Financial Statements

Five Year Record 
Independent Auditors’ Report 
Group Accounts 
Notes to the Group Accounts 
Company Accounts 
Notes to the Company Accounts 

78
79
85
89
124
126

78

Five Year Record

Underlying revenue
Underlying profit before taxation
Non-underlying items
Profit/(loss) before taxation
Taxation*
Profit/(loss) after taxation

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

2019 
(52 weeks)
£m
1,173.5
101.0
(121.0)
(20.0)
2.0
(18.0)

Net assets

782.9

752.1

931.4

957.6

811.1

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

Dividend per ordinary share

4.1p
8.7p
12.8p

7.0p

12.7p
1.2p
13.9p

7.3p

14.2p
–
14.2p

7.5p

7.1p
6.8p
13.9p

7.5p

(2.8)p
16.3p
13.5p

7.5p

* 

Taxation includes the tax on non-underlying items together with a non-underlying credit 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.

Marston’s PLC Annual Report and Accounts 201979

Independent auditors’ report to the members 
of Marston’s PLC

Report on the audit of the financial statements

Opinion
In our opinion, 

•  Marston’s PLC’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair view of the state of the 

Group’s and of the Company’s affairs as at 28 September 2019 and of the Group’s loss and cash flows for the 52 week period (the “period”) then ended;

•  the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the 

European Union;

•  the Company financial 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 financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial 

statements, Article 4 of the IAS Regulation.

We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the Group and Company 
Balance Sheets as at 28 September 2019; the Group Income Statement and 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 financial statements, which include a description 
of the significant 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 financial statements section of our report. We believe that the audit evidence we have 
obtained is sufficient 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 financial statements in the UK, 
which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled 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 financial statements, we have provided no non-audit services to the Group or the Company in the period from 
30 September 2018 to 28 September 2019.

Our audit approach
Overview

Materiality

•  Overall Group materiality: £5.1 million (2018: £5.2 million), based on 5% of profit before tax and  

non-underlying items.

•  Overall Company materiality: £23.7 million (2018: £23.0 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).
•  Valuation of financial instruments (notes 1, 4, 21 and 25) (Group).
•  Presentation and disclosure of the expected impact of IFRS 16 (note 1) (Group).

Key audit
matters

Marston’s PLC Annual Report and Accounts 2019Financial Statements80

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 financial statements. In particular, we looked at 
where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering 
future events that are inherently uncertain. 

Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to unethical 
and prohibited business practices, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also 
considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, the Listing 
Rules and UK tax legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the 
risk of override of controls), and determined that the principal risks were related to posting inappropriate entries to increase revenue or reduce expenditure, 
and management bias in accounting estimates. The Group engagement team audits the whole Group, therefore the risk assessment and procedures 
performed was consistent throughout the whole Group. Audit procedures performed by the Group engagement team included:

•  Discussions with management and internal audit to ascertain whether there were any known or suspected instances of non-compliance with laws and 

regulations and fraud;

•  Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations or posted by senior management; 

•  Challenging assumptions and judgements made by management in their significant accounting estimates. 

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 reflected in the financial statements, the less likely we would become aware of it. Also, 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.

Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current 
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified 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 financial 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 identified 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 significant item on the 
balance sheet and there are complex and subjective assumptions used 
in the valuations, including the future expected financial performance of 
pubs and the earnings multiples applied. A full external valuation of the 
estate was undertaken during FY18. 

In FY19, management have undertaken an exercise to identify if there 
have been any impairment triggers or changes in value such as a 
change in market conditions or a fall in the trading results of a pub or 
segment. Other factors considered relate to property based transactions 
both within the marketplace and the Marston’s estate, which could 
indicate changes in the carrying value of the estate. Management have 
noted such triggers and have recognised a net impairment charge of 
£69.2 million, of which a net charge of £44.6 million has been recorded 
in the income statement and a net charge of £24.6 million has been 
recorded within the revaluation reserve within equity.

This represents a significant matter considered by the Audit Committee as 
discussed on page 53 to the financial statements.

We reviewed the Directors’ annual assessment and assessed the 
appropriateness and completeness of the impairment triggers identified. 
We utilised internal specialists to validate the conclusions reached, 
taking into account the impact of any changes in macroeconomic conditions, 
pub performance within each segment and recent market transactions.

We have examined the assumptions within the impairment model and 
checked that the source data utilised therein agrees to the underlying financial 
records. For those premises identified as having an impairment trigger, 
largely as a result of poor trading performance, we looked at historical pub 
performance and the planned level of investment in a property which would 
be required to bring that location up to the Fair Maintainable Trade (FMT) 
value determined in the FY18 full external valuation. Those premises where the 
investment spend was not merited and where there were no other relevant 
factors impacting performance were subject to an impairment charge. 

We found management’s assumptions to be reasonable and have concluded 
that the estate continues to be valued in line with the Group’s policy using 
appropriate methodologies and assumptions, which are consistent with IFRS.

In light of the announcement relating to disposal of a portfolio of pubs 
subsequent to the balance sheet date we have considered whether the loss 
on disposal represents an impairment trigger requiring further impairment 
reviews by management. We are satisfied that no such factors exist in the 
remaining estate. We are also satisfied that the disposal was not committed 
to at the current period end and the related pubs did not meet the definition 
of “assets held for sale”.

Marston’s PLC Annual Report and Accounts 201981

Key audit matter

How our audit addressed the key audit matter

Valuation of financial instruments (notes 1, 4, 21 and 25) 
– Group
The Group holds a number of interest rate swaps which are categorised 
as financial instruments at fair value through profit or loss. There is 
one instrument which is currently designated as part of a hedging 
relationship. The fair value of these instruments represents a material 
liability on the Group’s balance sheet. The Group is exposed to fair 
value and interest rate movements across all of these instruments, and 
where a hedging relationship has not been designated, this creates 
volatility in the income statement. 

We have obtained third party confirmations for all interest rate swaps and 
ensured these are consistent with the amounts recognised by the Group. 

We used valuation specialists to form an independent expectation of the risk 
free valuation for all of these interest rate swaps. Our valuation specialists also 
estimated the impact of the credit risk adjustment arising from the Group’s own 
credit risk for these liabilities.

We considered the hedge effectiveness testing for the one hedging 
relationship, validating the accuracy of the calculation and confirming that the 
hedge remains effective. 

This represents a significant matter considered by the Audit Committee 
as discussed on page 53 to the financial statements.

We found the valuation of interest rate swaps to be consistent with the 
evidence obtained.

Disclosure of items as ‘non-underlying’ (notes 1 and 4) 
– Group
The financial statements include certain items which are disclosed 
as ‘non-underlying’ such as movements in financial assumptions 
used in determining onerous lease provisions, reorganisation and 
integration costs, impairment of freehold and leasehold properties, 
write-off of EPOS equipment, write-off of acquisition and development 
costs, past service cost in respect of Guaranteed Minimum Pension 
equalisation, net interest on the net defined benefit asset/liability, swap 
recouponing fees and interest rate swap movements. Management 
has included these items as non-underlying using the criteria 
explained in their accounting policy which is disclosed in note 1 to the 
financial statements.

We focused on this area because non-underlying items are 
not defined by IFRS as adopted by the European Union and it 
therefore requires judgement by the Directors to identify such items. 
Consistency in identifying and disclosing items as non-underlying is 
important to maintain comparability of the current period results with 
previous periods.

This represents a significant matter considered by the Audit Committee 
as discussed on page 53 to the financial statements.

We challenged 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 
classification of items to be consistent with the accounting policy.

We also considered whether the threshold applied by management to non-
underlying items by reference to the financial statement line item 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 challenged whether other non-recurring items should have been 
classified as non-underlying and discussed this with the Directors and the 
Audit Committee. We confirmed that all significant items meet the criteria 
in the Group’s accounting policy and that the treatment was consistent 
year on year and there are no further significant items that require disclosure 
as non-underlying.

Presentation and disclosure of the expected impact of
IFRS 16 (note 1) – Group
IFRS 16 will be adopted by the Group from 29 September 2019 on a 
modified retrospective basis. The Group has finalised its assessment of 
the impact that the new accounting standard will have on its balance 
sheet and income statement. In accordance with IAS 8 the expected 
impact is disclosed in note 1 to the financial statements. 

We have obtained and inspected a sample of inputs into management’s 
model and agreed these back to the original lease agreements and the 
underlying financial records. We have recalculated the accounting entries 
for a sample of leases and confirmed management’s model is performing this 
calculation accurately. We have considered completeness by reconciling the 
model to the Group’s operating lease commitments (disclosed per note 32 to 
the financial statements).

In order to compute the transitional impact of IFRS 16 the Group has 
created a spreadsheet model summarising all property and equipment 
lease data. There are a number of judgements applied and estimates 
made within the model for example the appropriate discount rate to be 
utilised for each lease and the assumptions around lease renewals.

We have assessed the methodology applied to calculate the discount 
rate using an incremental borrowing rate specific to the Group in line with 
IFRS 16. We have considered the other assumptions to be appropriate 
including ensuring all the leases meet the definition of a lease under 
IFRS 16 and that the lease term is accurate.

This represents a significant matter considered by the Audit Committee 
as discussed on page 53 to the financial statements.

We are satisfied that the disclosure of the expected impact of IFRS 16 is 
in accordance with the Group’s stated accounting policy in relation to 
new accounting standards and the disclosure of the transitional impact on 
adoption, per note 1 to the financial statements, is appropriate.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into 
account the 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 financial 
statements are a consolidation of subsidiaries and special purpose entities, principally comprising the Group’s operating businesses, property companies, 
securitisation vehicles, holding companies and an insurance company. In establishing the overall approach to the Group audit we considered the consolidated 
trial balance for the Group as a whole and designed our audit testing for each financial statement line item based on the size and nature of the transactions 
and balances that 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 financial statements. 

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.

Marston’s PLC Annual Report and Accounts 2019Financial Statements82

Independent auditors’ report to the members 
of Marston’s PLC continued

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative 
considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line 
items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. 

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

Overall materiality

£5.1 million (2018: £5.2 million).

Group financial statements

Company financial statements

£23.7 million (2018: £23.0 million).

How we determined it

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

1.75% of net assets.

Rationale for 
benchmark applied

We believe that profit 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 classified as non-underlying is consistent with 
previous years 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 appropriate upon which to 
base materiality.

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 £nil and £10.2 million.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.2 million (Group audit) (2018: £0.3 
million) and £1.2 million (Company audit) (2018: £1.2 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 financial statements about whether the Directors considered 
it appropriate to adopt the going concern basis of accounting in preparing the financial 
statements and the Directors’ identification 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 financial 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. For example, the terms on which the United 
Kingdom may withdraw from the European Union are 
not clear, and it is difficult to evaluate all of the potential 
implications on the Group’s trade, customers, suppliers and 
the wider economy.

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 financial statements and our auditors’ report thereon. The Directors are 
responsible for the other information. Our opinion on the financial 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other 
information is materially inconsistent with the financial 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 financial 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.

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).

Marston’s PLC Annual Report and Accounts 201983

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 28 September 2019 is consistent with the financial 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 46 to 49)
about internal controls and risk management systems in relation to financial 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 financial 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 46 to 49)
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’ confirmation on page 30 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 36 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 qualifications 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 enquiries 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 76, 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 page 52 to 53 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 specified, 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)

Marston’s PLC Annual Report and Accounts 2019Financial Statements84

Independent auditors’ report to the members 
of Marston’s PLC continued

Responsibilities for the financial statements and the audit

Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 76, the Directors are responsible for the preparation of the financial 
statements in accordance with the applicable framework and for being satisfied 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 financial statements that are free from material misstatement, whether due to fraud 
or error.

In preparing the financial 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 financial statements
Our objectives are to obtain reasonable assurance about whether the financial 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 influence the economic decisions of users taken on the basis of 
these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. 
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 specified by law are not made; or

•  the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records 

and returns. 

We have no exceptions to report arising from this responsibility. 

Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 27 January 2003 to audit the financial statements for the 
period ended 27 September 2003 and subsequent financial periods. The period of total uninterrupted engagement is 17 years, covering the periods ended 
27 September 2003 to 28 September 2019.

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

27 November 2019

Marston’s PLC Annual Report and Accounts 2019Group Income Statement
For the 52 weeks ended 28 September 2019

Revenue
Operating expenses
Operating profit
Finance costs
Finance income
Interest rate swap movements
Net finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) for the period attributable 

to equity shareholders

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

Note
2, 3, 4
3
2, 4
6
6
4, 6
4, 6

4, 7

9
9
9
9

85

Underlying 
£m
1,173.5
(994.8)
178.7
(78.1)
0.4
–
(77.7)
101.0
(15.4)

2019

Non- 
underlying 
 £m
–
(72.2)
(72.2)
(0.6)
0.5
(48.7)
(48.8)
(121.0)
17.4

Total 
£m
1,173.5
(1,067.0)
106.5
(78.7)
0.9 
(48.7)
(126.5)
(20.0)
2.0

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)

85.6

(103.6)

(18.0)

87.9

(42.9)

45.0

(2.8)p
13.5p
(2.8)p
13.4p

Group Statement of Comprehensive Income
For the 52 weeks ended 28 September 2019

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

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

Other comprehensive (expense)/income for the period
Total comprehensive (expense)/income for the period

7.1p
13.9p
7.0p
13.7p

2018
 £m
45.0

–
10.9
(1.8)
9.1

14.0
170.3
(161.7)
(2.3)
20.3
29.4
74.4

2019
 £m
(18.0)

(20.5)
11.2
1.5
(7.8)

(54.7)
2.8
(27.4)
11.1
(68.2)
(76.0)
(94.0)

Marston’s PLC Annual Report and Accounts 2019Financial Statements86

Group Cash Flow Statement
For the 52 weeks ended 28 September 2019

Operating activities
Underlying operating profit
Depreciation and amortisation
Underlying EBITDA
Non-underlying operating items
EBITDA
Working capital movement
Non-cash movements
Decrease in provisions and other non-current liabilities
Difference between defined benefit pension contributions paid and amounts charged
Income tax paid
Net cash inflow from operating activities
Investing activities
Interest received
Sale of property, plant and equipment and assets held for sale
Purchase of property, plant and equipment and intangible assets
Movement in other non-current assets
Net transfer from other cash deposits
Net cash inflow/(outflow) from investing activities
Financing activities
Equity dividends paid
Interest paid
Arrangement costs of bank facilities
Arrangement costs of other lease related borrowings
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 finance leases repaid
Advance of other lease related borrowings
Repayment of other borrowings
Net cash outflow from financing activities
Net decrease in cash and cash equivalents

Note

31
31

8

30

2019 
£m

178.7
43.2
221.9
(72.2)
149.7
10.3
51.0
(3.4)
(3.0)
(9.0)
195.6

0.5
49.8
(133.8)
0.3
118.0
34.8

(47.5)
(74.4)
(1.1)
–
–
0.1
(31.7)
(0.7)
48.6
(7.5)
–
(120.0)
(234.2)
(3.8)

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)

Marston’s PLC Annual Report and Accounts 2019Group Balance Sheet
As at 28 September 2019

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

Current assets
Inventories
Trade and other receivables
Other cash deposits*
Cash and cash equivalents

Assets held for sale

Current liabilities
Borrowings*
Derivative financial instruments
Trade and other payables
Current tax liabilities
Provisions for other liabilities and charges

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

87

28 September 
 2019 
£m

 29 September 
2018 
£m

230.3
88.5
2,350.4
9.3
5.8
–
2,684.3

43.6
90.9
2.0
37.6
174.1

1.7

(54.9)
(184.2)
(248.3)
(1.7)
(2.6)
(491.7)

(1,383.4)
(51.3)
(2.6)
(19.7)
(63.9)
(36.4)
(1,557.3)
811.1

48.7
334.0
598.9
23.7
6.8
(125.9)
(112.0)
36.9
811.1

230.3
70.0
2,408.1
9.6
–
15.6
2,733.6

44.6
104.9
120.0
41.4
310.9

2.3

(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

Note

10
11
12
13
14
15

16
17

18

19
21
22

23

19
21
24
23
14
15

28

29
29

29

The financial statements were approved by the Board and authorised for issue on 27 November 2019 and are signed on its behalf by:

Ralph Findlay 
Chief Executive Officer

27 November 2019

* At 29 September 2018 other cash deposits comprised £120.0 million drawn down under the liquidity facility and borrowings included the corresponding liability (note 30).

Marston’s PLC Annual Report and Accounts 2019Financial Statements88

Group Statement of Changes in Equity
For the 52 weeks ended 28 September 2019

At 30 September 2018 (as previously 

reported)

Adjustment for adoption of IFRS 9
Tax impact of IFRS 9 adjustment
At 30 September 2018 (as restated)
Loss for the period
Remeasurement of retirement benefits
Tax on remeasurement of retirement 

benefits

Losses on cash flow hedges
Transfers to the income statement on 

cash flow hedges

Tax on hedging reserve movements
Property revaluation
Property impairment
Deferred tax on properties
Total comprehensive expense
Share-based payments
Tax on share-based payments
Sale of own shares
Transfer disposals to retained earnings
Transfer tax to retained earnings
Transfer depreciation to retained 

earnings

Dividends paid
Total transactions with owners
At 28 September 2019

At 1 October 2017
Profit for the period
Remeasurement of retirement benefits
Tax on remeasurement of retirement 

benefits

Transfers to the income statement on 

cash flow hedges

Tax on hedging reserve movements
Property revaluation
Property impairment
Deferred tax on properties
Total comprehensive income
Share-based payments
Purchase of own shares
Sale of own shares
Transfer disposals to retained earnings
Transfer tax to retained earnings
Transfer depreciation to retained 

earnings

Dividends paid
Total transactions with owners
At 29 September 2018

Equity  
share  
capital  
£m

48.7
–
–
48.7
–
–

Share  
premium  
account 
£m

334.0
–
–
334.0
–
–

–
–

–
–
–
–
–
–
–
–
–
–
–

–
–

–
–
–
–
–
–
–
–
–
–
–

–
–
–
48.7

Equity  
share  
capital  
£m
48.7
–
–

–
–
–
334.0

Share  
premium 
account  
£m
334.0
–
–

–

–
–
–
–
–
–
–
–
–
–
–

–

–
–
–
–
–
–
–
–
–
–
–

–
–
–
48.7

–
–
–
334.0

Revaluation 
reserve  
£m

627.2
–
–
627.2
–
–

–
–

–
–
2.8
(27.4)
1.8
(22.8)
–
–
–
(5.2)
0.7

(1.0)
–
(5.5)
598.9

Revaluation 
reserve  
£m
624.2
–
–

–

–
–
170.3
(161.7)
0.1
8.7
–
–
–
(5.6)
0.9

(1.0)
–
(5.7)
627.2

Merger 
reserve 
£m

23.7
–
–
23.7
–
–

–
–

–
–
–
–
–
–
–
–
–
–
–

–
–
–
23.7

Merger 
reserve 
£m
71.2
–
–

–

–
–
–
–
–
–
–
–
–
–
–

Capital
redemption 
reserve 
£m

6.8
–
–
6.8
–
–

–
–

–
–
–
–
–
–
–
–
–
–
–

Hedging 
reserve 
£m

(118.1)
– 
–
(118.1)
–
–

–
(20.5)

11.2
1.5
–
–
–
(7.8)
–
–
–
–
–

Own 
shares 
£m

(112.3)
–
–
(112.3)
–
–

–
–

–
–
–
–
–
–
–
–
0.3
–
–

–
–
–
6.8

–
–
–
(125.9)

–
–
0.3
(112.0)

Capital 
redemption 
reserve 
£m
6.8
–
–

–

–
–
–
–
–
–
–
–
–
–
– 

Hedging 
 reserve 
£m
(127.2)
–
–

–

10.9
(1.8)
–
–
–
9.1
–
–
–
–
–

Own 
 shares 
£m
(111.3)
–
–

–
–
–
–
–
–
–
(1.2)
0.2
–
–

–
(47.5)
(47.5)
23.7

–
–
–
6.8

–
–
–
(118.1)

–
–
(1.0)
(112.3)

Retained 
earnings  
£m

147.6
(6.7)
1.2
142.1
(18.0)
(54.7)

9.3
–

–
–
–
–
–
(63.4)
0.3
0.1
(0.2)
5.2
(0.7)

1.0
(47.5)
(41.8)
36.9

Retained 
earnings 
£m
85.0
45.0
14.0

Total  
equity  
£m

957.6
(6.7)
1.2
952.1
(18.0)
(54.7)

9.3
(20.5)

11.2
1.5
2.8
(27.4)
1.8
(94.0)
0.3
0.1
0.1
–
–

–
(47.5)
(47.0)
811.1

Total 
equity 
£m
931.4
45.0
14.0

–
–
–
–
–
56.6
0.5
–
(0.2)
5.6
(0.9)

1.0
–
6.0
147.6

10.9
(1.8)
170.3
(161.7)
0.1
74.4
0.5
(1.2)
–
–
–

–
(47.5)
(48.2)
957.6

–

(2.4)

(2.4)

Further detail in respect of the Group’s equity is provided in notes 28 and 29 to the financial statements.

Marston’s PLC Annual Report and Accounts 201989

Notes
For the 52 weeks ended 28 September 2019

1  Accounting policies

Basis of preparation
These consolidated financial statements for the 52 weeks ended 28 September 2019 (2018: 52 weeks ended 29 September 2018) 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 financial statements have been prepared under the 
historical cost convention as modified by the revaluation of certain items, principally land and buildings, derivative financial instruments, retirement benefits and 
share-based payments.

At the time of approving the financial 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 financial 
statements. Further detail is provided in the Viability Statement within the Strategic Report.

New standards and interpretations
The Group has adopted IFRS 15 ‘Revenue from Contracts with Customers’ in the current period using the modified retrospective approach in paragraph 
C3(b) of the standard. IFRS 15 introduces a new five 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 reflects the 
consideration to which the entity expects to be entitled in exchange for those goods and services. The adoption of IFRS 15 has not had any impact on the 
Group’s results or financial position.

The Group has adopted IFRS 9 ‘Financial Instruments’ in the current period. Comparative amounts have not been restated in accordance with the transitional 
provisions in paragraph 7.2.15 of the standard. IFRS 9 introduces a new model for the classification and measurement of financial assets, a new expected 
credit loss model for the impairment of financial assets held at amortised cost, and new requirements for hedge accounting. Details of the impact of the 
adoption of IFRS 9 are provided in note 35.

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

IFRS 3

Business Combinations 

Amendments to clarify the definition of a business

IFRS 7

Financial Instruments: Disclosures 

Amendments regarding pre-replacement issues in the context of the IBOR reform

IFRS 9 

Financial Instruments 

1 January 2020

1 January 2020

Amendments regarding prepayment features with negative compensation and modifications of financial liabilities 
Amendments regarding pre-replacement issues in the context of the IBOR reform

1 January 2019 
1 January 2020

IFRS 10 

Consolidated Financial Statements 

Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture

Date deferred

IFRS 16

Leases 

New accounting standard

IFRS 17

Insurance Contracts 

New accounting standard

IAS 1 

Presentation of Financial Statements 

Amendments regarding the definition of material

IAS 8 

Accounting Policies, Changes in Accounting Estimates and Errors 

Amendments regarding the definition of material

IAS 19 

Employee Benefits 

Amendments regarding plan amendments, curtailments or settlements

IAS 28

Investments in Associates and Joint Ventures 

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

IFRIC 23

Uncertainty over Income Tax Treatments

1 January 2019

1 January 2021

1 January 2020

1 January 2020

1 January 2019

Date deferred
1 January 2019
1 January 2019

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

The adoption of IFRS 16 ‘Leases’ is expected to have a significant 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 finance 
costs in the income statement. The Group will follow the modified retrospective approach in IFRS 16 and will also take the option to measure the right-of-use 
assets as if IFRS 16 had always applied but using the Group’s incremental borrowing rate at the date of initial application. The Group has undertaken a 
detailed assessment to determine the overall impact of the adoption of IFRS 16 on its results and financial position. It is expected that upon adopting IFRS 16 
and making related accounting policy changes on 29 September 2019, the Group’s borrowings will increase by around £285 million to £310 million and 
net assets will reduce by around £45 million to £55 million. Assuming there are no significant changes to the portfolio of leases held by the Group as at 29 
September 2019, it is expected that profit after tax for the period ended 3 October 2020 will be around £3 million to £7 million lower.

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 financial position.

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

Marston’s PLC Annual Report and Accounts 2019Financial Statements90

Notes continued
For the 52 weeks ended 28 September 2019

1  Accounting policies (continued)

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

The consolidated financial statements 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 defined in IFRS 10 ‘Consolidated Financial Statements’, and hence for the purpose of the 
consolidated financial statements they have been treated as subsidiary undertakings.

Revenue and other operating income
The Group’s revenue from contracts with customers comprises retail sales, wholesale sales and contract services.

Retail sales
The Group sells food and drink to customers in its pubs. Revenue from the sale of food and drink is recognised when the goods are sold to the customers in the 
pubs. Payment of the transaction price is due immediately when the goods are provided to the customer.

The Group provides accommodation to customers in its public houses and lodges. Revenue from the provision of accommodation is recognised over the period 
of the customer’s stay. Payment of the transaction price is due at the time of the customer’s stay.

The Group provides gaming machines for customers to play in its pubs. Revenue from gaming machines is recognised when the game has been played. 
Payment of the transaction price is due when the game is played.

It is considered that, in respect of its franchised arrangements, the Group has exposure to the significant risks and rewards associated with the above sales of 
goods and rendering of services and as such the total income from franchised pubs is included within the Group’s revenue.

Wholesale sales
The Group sells drinks to tenants of its licensed properties, other pub operators, wholesalers and retailers. Revenue is recognised when the Group has 
transferred control of the goods to the customer. This occurs when the goods have been delivered to the customer, the customer has obtained legal title to the 
goods, the Group cannot require the return or transfer of the goods and the customer has an unconditional obligation to pay for the goods.

Drinks are often sold with retrospective volume discounts based on sales over a defined period. The anticipated discounts are estimated based on 
accumulated experience using the expected value method and are deducted from the sales price that is recognised in revenue. A refund liability is recognised 
within trade and other payables for the volume discounts expected to be paid in respect of sales made prior to the balance sheet date.

Contract services
The Group brews and packages drinks for customers. Revenue is recognised when the Group has transferred control of the goods to the customer. This occurs 
when the goods have been delivered to the customer, the customer has obtained legal title to the goods and the customer has an unconditional obligation to 
pay for the goods.

The Group also transports and delivers goods for customers. Revenue is recognised over time as the Group transports the goods; due to the short distances the 
goods are transported this is equivalent to recognising revenue at the point when the goods are delivered to the required location.

In respect of both wholesale sales and contract services, a receivable is recognised when the goods are delivered, and payment is due in line with each 
customer’s individual credit terms. These terms are all less than one year and as such no element of financing is considered to be present. 

Revenue is recorded net of discounts, intra group transactions, VAT and excise duty relating to the brewing and packaging of certain products.

The Group has elected to apply the practical expedient in paragraph 63 of IFRS 15 ‘Revenue from Contracts with Customers’ whereby the promised amount of 
consideration is not adjusted for the effects of a significant financing component if it is expected that payment will be received within one year.

The Group also includes rent receivable from tenants of its licensed properties within revenue. This income is recognised in the period to which it relates.

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, and reflects the different distribution channels, customer profiles and nature of products and 
services provided within each segment. An element of Group Services’ costs is allocated to each of the trading segments. 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 identified as the Executive Directors. 

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

Marston’s PLC Annual Report and Accounts 201991

1  Accounting policies (continued)

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

Other adjusting items comprised 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 has been 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 identified separately and measured reliably.

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

Indefinite 
Life of the lease 
3 to 20 years 
10 years

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

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

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

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

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

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

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

are stated at cost.

•  Depreciation is charged to the income statement on a straight-line basis to provide for the cost or valuation of the assets less their residual values over their 

useful lives.

•  Freehold properties are depreciated to their residual values over 50 years.
•  Leasehold properties are depreciated to their residual values over the lower of the lease term and 50 years.
•  Plant and machinery and fixtures, fittings, 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.

Marston’s PLC Annual Report and Accounts 2019Financial Statements92

Notes continued
For the 52 weeks ended 28 September 2019

1  Accounting policies (continued)

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

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

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

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

Impairment
If there are indications of impairment or reversal of impairment, an assessment is made of the recoverable amount. An impairment loss is recognised where the 
recoverable amount is lower than the carrying value of assets, including goodwill. The recoverable amount is the higher of value in use and fair 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 classified as finance leases if the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are 
classified as operating leases.

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

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

Obligations arising from sale and leaseback arrangements with repurchase options that do not fall within the scope of IAS 17 ‘Leases’ are classified as other 
lease related borrowings and accounted for in accordance with IFRS 9 ‘Financial Instruments’.

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

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

Financial instruments
The Group classifies its financial assets in one of the following two categories: at fair value through profit or loss and at amortised cost. The Group classifies its 
financial liabilities in one of the following two categories: at fair value through profit or loss and other financial liabilities. 

The Group classifies a financial asset as at amortised cost if the asset is held within a business model whose objective is to hold financial assets in order to 
collect contractual cash flows and the contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest.

In the prior period, under IAS 39 ‘Financial Instruments: Recognition and Measurement’, the Group classified its financial assets as either at fair value through 
profit or loss or loans and receivables.

Marston’s PLC Annual Report and Accounts 201993

1  Accounting policies (continued)

Financial instruments at fair value through profit or loss
Derivatives are categorised as financial instruments at fair value through profit or loss unless they are designated as part of a hedging relationship. Trade loans 
are also categorised as at fair value through profit or loss as they do not give rise on specified dates to cash flows that are solely payments of principal and 
interest. The Group holds no other financial instruments at fair value through profit or loss.

Financial assets at amortised cost
Financial assets at amortised cost comprise trade receivables, other receivables, other cash deposits and cash and cash equivalents in the balance sheet and 
are measured using the effective interest method.

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

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

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

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

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

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

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 in the period in which they arise.

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

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

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

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

Trade loans
In common with other major brewers, the Group makes trade loans to publicans who purchase the Group’s beer. Significant trade loans are secured against 
the property of the loan recipient. Trade loans are classified as other non-current assets in the balance sheet. Since the adoption of IFRS 9 ‘Financial Instruments’ 
at the start of the current period trade loans are held at fair value. At the prior period end, under IAS 39 ‘Financial Instruments: Recognition and Measurement’, 
trade loans were previously classified as loans and receivables and were held at amortised cost.

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. 

Since the adoption of IFRS 9 ‘Financial Instruments’ at the start of the current period the Group applies the expected credit loss model to calculate any loss 
allowance for trade receivables and other receivables.

Marston’s PLC Annual Report and Accounts 2019Financial Statements94

Notes continued
For the 52 weeks ended 28 September 2019

1  Accounting policies (continued)

For trade receivables and other receivables that result from transactions that are within the scope of IFRS 15 ‘Revenue from Contracts with Customers’ or from 
transactions that are within the scope of IFRS 16 ‘Leases’ the loss allowance is measured as the lifetime expected credit losses. For any other trade or other 
receivable the loss allowance is measured as the 12-month expected credit losses unless the credit risk has increased significantly since initial recognition, in 
which case the lifetime expected credit losses are used. Details of the methodologies used to calculate the expected credit losses for the different groupings of 
trade receivables and other receivables are given in note 25.

In the prior period, under IAS 39 ‘Financial Instruments: Recognition and Measurement’, the incurred loss model was applied and a provision for impairment 
of trade receivables and other receivables was established when there was objective evidence that the Group would not be able to collect all amounts due 
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor would enter bankruptcy or financial 
reorganisation and default or delinquency in payments were considered indicators that the trade or other receivable was impaired. The amount of the provision 
was the difference between the asset’s carrying amount and the estimated future cash flows. 

The carrying amount of trade receivables and other receivables is reduced through the use of an allowance account, and the amount of the loss allowance is 
recognised in the income statement within other net operating charges. The Group’s policy is to write off trade receivables and other receivables when there 
is no reasonable expectation of recovery of the balance due. Indicators that there is no reasonable expectation of recovery depend on the type of debtor/
customer and include a debt being over four months old, the failure of the debtor to engage in a repayment plan and the failure to recover any amounts 
through enforcement activity. Subsequent recoveries of amounts previously written off are credited against other net operating charges in the income statement.

Other cash deposits
Cash held on deposit with banks with a maturity of more than three months at the date of acquisition is classified within other cash deposits.

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

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

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

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

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

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

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

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

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 defined contribution pension plans are charged to the income statement in the period in which they arise. 

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

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

Marston’s PLC Annual Report and Accounts 201995

1  Accounting policies (continued)

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

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

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

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

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

When valuations of leasehold properties (based on future estimated income streams) give rise to a deficit as a result of onerous lease conditions they are 
recognised as provisions. These provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax 
rate that reflects current market assessments of the time value of money and the risks specific to the obligation for which the estimates of future cash flows have 
not been adjusted. The key assumptions used in the discounted cash flow calculations are the discount and inflation 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 financial statements when they have been approved by the shareholders. 
Interim dividends are recognised when paid.

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

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

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements:

Retirement benefits
•  Recognition of a retirement benefit surplus (see accounting policy).

Lease classification
•  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.

Marston’s PLC Annual Report and Accounts 2019Financial Statements96

Notes continued
For the 52 weeks ended 28 September 2019

1  Accounting policies (continued)

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

Deferred tax
•  Judgements in respect of certain tax elections and claims that can be made by the Group in future periods.

The following estimates and assumptions have a significant 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).

Impairment
•  Assumptions made in the value in use calculation, in particular the pre-tax discount rate applied to cash flow projections and the growth rate used to 

extrapolate projected cash flows beyond one year budgets (notes 10 and 11).

Retirement benefits
•  Actuarial assumptions in respect of the defined benefit pension plan, which include discount rates, rates of increase in pensions, inflation rates and life 

expectancies (note 15).

Financial instruments
•  Valuation of financial instruments that are not traded in an active market (note 25).

Property lease provisions
•  Assumptions made in the discounted cash flow calculations, in particular the market rents, vacant periods, future trading income, inflation rates and discount 

rates (see accounting policy).

2  Segment reporting

Underlying revenue by segment
Destination and Premium
Taverns
Brewing
Group Services
Underlying revenue
Non-underlying items
Revenue

Underlying operating profit by segment
Destination and Premium
Taverns
Brewing
Group Services
Underlying operating profit
Non-underlying operating items
Operating profit
Net finance costs
(Loss)/profit before taxation

Other segment information
Destination and Premium
Taverns
Brewing
Group Services
Total

2019 
£m
460.1
324.1
389.3
–
1,173.5
–
1,173.5

2019
£m
87.1
86.3
32.6
(27.3)
178.7
(72.2)
106.5
(126.5)
(20.0)

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

Additions to 
non-current assets*

Depreciation and 
amortisation

2019 
£m
73.5
31.4
16.7
7.6
129.2

2018 
£m
102.6
29.1
27.3
6.7
165.7

2019 
£m
17.3
10.0
11.5
4.4
43.2

2018 
£m
16.4
9.2
10.7
3.8
40.1

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

Geographical areas
Revenue generated outside the United Kingdom during the period was £12.8 million (2018: £12.2 million).

Marston’s PLC Annual Report and Accounts 20193  Revenue and operating expenses

Revenue
Retail sales
Destination and Premium
Taverns

Wholesale sales
Taverns
Brewing

Contract services
Brewing

Revenue from contracts with customers
Rental income

Taverns
Total revenue

Operating expenses
Change in stocks of finished goods and work in progress
Own work capitalised
Other operating income
Raw materials, consumables and excise duties
Depreciation of property, plant and equipment
Amortisation of intangible assets
Employee costs
Hire of plant and machinery
Property 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 finished goods and work in progress
Employee costs
Property 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

97

2019 
£m

2018 
£m

460.1
262.7
722.8

46.7
366.1
412.8

23.2
1,158.8

14.7
1,173.5

2019
£m
0.3
(7.9)
(9.2)
466.2
41.7
1.5
246.1
2.7
19.9
(0.1)
44.6
261.2
1,067.0

2019
£m
–
8.4
–
43.4
20.4
72.2

2019
£m
0.2

0.1
0.1
0.4

450.7
247.6
698.3

49.9
359.4
409.3

18.3
1,125.9

15.4
1,141.3

2018
£m
(3.4)
(7.3)
(10.6)
456.4
39.0
1.1
234.3
3.1
17.6
(0.4)
39.4
238.7
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

Marston’s PLC Annual Report and Accounts 2019Financial Statements98

Notes continued
For the 52 weeks ended 28 September 2019

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
Write-off of EPOS equipment
Write-off of acquisition and development costs
Past service cost in respect of Guaranteed Minimum Pension equalisation

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 defined benefit asset/liability
Swap recouponing fees
Interest rate swap movements

Total non-underlying items

2019 
£m

2.3
8.1
43.4
3.9
9.9
4.6
72.2

–
–
72.2

(0.5)
0.6
48.7
48.8
121.0

2018 
£m

0.1
7.3
39.8
–
–
–
47.2

1.9
1.9
49.1

0.1
–
0.5
0.6
49.7

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 £2.3 million 
(2018: £0.1 million) in the total provision.

Reorganisation and integration costs
During the current period the Group incurred reorganisation and integration costs of £8.1 million (2018: £7.3 million), primarily as a result of the acquisition of 
the beer business of Charles Wells in the period ended 30 September 2017.

Impairment of freehold and leasehold properties
In light of changes in the market and pub performance the Group undertook a detailed valuation review of its Destination and Premium estate in the current 
period, which resulted in the impairment of a number of these 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 revaluation adjustments in respect of each of the above were recognised in the revaluation reserve or income statement as appropriate. The amounts 
recognised in the income statement were:

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

2019 
£m
–
–
43.4
–
–
–
43.4

2018 
£m
0.1
(0.3)
70.6
(31.4)
0.4
0.4
39.8

Write-off of EPOS equipment
Due to the rollout of the Group’s new EPOS system the assets relating to the old system have been written off in the current period.

Write-off of acquisition and development costs
The Group has decided to focus its capital expenditure upon its existing estate and as such acquisition and development costs of £9.9 million in respect of sites 
which the Group no longer intends to acquire and/or develop have been written off in the current period.

Past service cost in respect of Guaranteed Minimum Pension equalisation
On 26 October 2018 a High Court ruling indicated that Guaranteed Minimum Pensions must be equalised for men and women. This requirement has been 
reflected in the calculation of the Group’s net defined benefit asset/liability at 28 September 2019 and the resulting additional past service cost has been 
presented as an exceptional item.

Net interest on net defined benefit asset/liability 
The net interest on the net defined benefit asset/liability in respect of the Group’s defined benefit pension plan was a credit of £0.5 million (2018: charge of 
£0.1 million) (note 15).

Marston’s PLC Annual Report and Accounts 201999

4  Non-underlying items (continued)

Swap recouponing fees
On 27 March 2019 the Group recouponed the interest rate swap that fixes the interest rate payable on the floating rate elements of its A1, A2, A3 and B 
securitised notes. The recouponing has had the effect of reducing the fixed interest rate paid for the next five years and increasing the fixed interest rate paid in 
the final four years of the swap’s term. The Group incurred fees of £0.6 million in relation to this transaction.

Interest rate swap movements
The Group’s interest rate swaps are revalued to fair value at each balance sheet date. For interest rate swaps which were designated as part of a hedging 
relationship a loss of £20.5 million (2018: £nil) has been recognised in the hedging reserve in respect of the effective portion of the fair value movement 
and £7.7 million (2018: £10.9 million) has been reclassified from the hedging reserve to underlying finance costs in the income statement in respect of the 
cash paid in the period. The ineffective portion of the fair value movement has been recognised within the income statement. The cash paid of £1.8 million 
(2018: £nil) has been recognised within underlying finance costs to ensure that underlying finance costs reflect the resulting fixed rate paid on the associated 
debt. The remainder of the ineffective portion of the fair value movement, a gain of £1.5 million (2018: loss of £0.3 million), has been recognised within non-
underlying items. In addition £3.5 million (2018: £nil) of the balance remaining in the hedging reserve in respect of discontinued cash flow hedges has been 
reclassified to the income statement within non-underlying items.

For interest rate swaps which were not designated as part of a hedging relationship the fair value movement has been recognised within the income statement. 
The net cash received of £1.3 million (2018: £2.6 million paid) has been recognised within underlying finance costs to ensure that underlying finance costs 
reflect the resulting fixed rate paid on the associated debt. The remainder of the fair value movement, a loss of £46.7 million (2018: £0.2 million), equal to the 
change in the carrying value of the interest rate swaps in the period, or from when hedge accounting ceased to be applied, has been recognised within non-
underlying items.

As a result of the above swap recouponing the hedging relationship between this interest rate swap and the associated debt ceased to meet the qualifying 
criteria for hedge accounting. The cumulative hedging loss existing in equity at 27 March 2019 remained in equity and is being recognised when the forecast 
transactions are ultimately recognised in the income statement. Fair value movements in respect of this interest rate swap after 27 March 2019 have been 
recognised wholly within the income statement.

Impact of taxation
The current tax credit relating to the above non-underlying items amounts to £2.6 million (2018: £1.6 million). The deferred tax credit relating to the above non-
underlying items amounts to £14.8 million (2018: £5.2 million). 

Prior period non-underlying items
During the period ended 4 October 2014 the Group disposed of a portfolio of 202 pubs and subsequently entered into a four year lease and five year 
management agreement in respect thereof. During the period ended 30 September 2017 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 were 
classified as a non-underlying item, comprised as follows:

Revenue
Operating expenses

5  Employees

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

A non-underlying charge of £8.4 million (2018: £3.7 million) is included in employee costs.

Average monthly number of employees
Bar staff
Management, administration and production

Key management personnel compensation
Short-term employee benefits

2018
£m
0.9
(2.8)
(1.9)

2018 
£m
206.4
17.1
8.7
0.5
1.6
234.3

2018
Number
11,433
2,865

2018
£m
1.7

2019 
£m
211.5
17.6
14.4
0.3
2.3
246.1

2019
Number
11,139
2,914

2019
£m
1.6

Marston’s PLC Annual Report and Accounts 2019Financial Statements100

Notes continued
For the 52 weeks ended 28 September 2019

6  Finance costs and income

Finance costs
Bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Other interest payable and similar charges

Exceptional finance costs
Net interest on net defined benefit asset/liability
Swap recouponing fees

Total finance costs

Finance income
Deposit and other interest receivable

Exceptional finance income
Net interest on net defined benefit asset/liability

Total finance income

Interest rate swap movements
Hedge ineffectiveness on cash flow hedges (net of cash paid)
Change in carrying value of interest rate swaps
Transfer of hedging reserve balance in respect of discontinued hedges

Net finance 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 in respect of tax on non-underlying items

Taxation (credit)/charge reported in the income statement

Statement of comprehensive income
Remeasurement of retirement benefits
Impairment and revaluation of properties
Hedging reserve movements
Taxation (credit)/charge reported in the statement of comprehensive income

Recognised directly in equity
Tax on share-based payments
Taxation credit recognised directly in equity

2019 
£m
14.9
40.4
1.3
19.9
1.6
78.1

–
0.6
0.6
78.7

(0.4)
(0.4)

(0.5)
(0.5)
(0.9)

(1.5)
46.7
3.5
48.7
126.5

2019 
£m

11.1
(0.7)
(2.6)
7.8

6.8
(1.8)
(14.8)
(9.8)
(2.0)

2019 
£m
(9.3)
(1.8)
(1.5)
(12.6)

2019
£m
(0.1)
(0.1)

2018 
£m
11.6
46.2
1.4
18.0
1.7
78.9

0.1
–
0.1
79.0

(0.4)
(0.4)

–
–
(0.4)

0.3
0.2
–
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

2018
£m
–
–

Marston’s PLC Annual Report and Accounts 2019101

7  Taxation (continued)

The actual tax rate for the period is lower (2018: lower) than the standard rate of corporation tax of 19% (2018: 19%). The differences are explained below:

Tax reconciliation
(Loss)/profit before tax

(Loss)/profit before tax multiplied by the corporation tax rate of 19% (2018: 19%)
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 (credit)/charge

2019 
£m
(20.0)

(3.8)

(2.5)
(1.3)
5.2
(0.6)
1.0
(2.0)

2018 
£m
54.3

10.3

(1.6)
(1.1)
2.6
(0.6)
(0.3)
9.3

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 2018 of 4.8p per share (2017: 4.8p)
Interim dividend for 2019 of 2.7p per share (2018: 2.7p)

2019 
£m
30.4
17.1
47.5

2018 
£m
30.4
17.1
47.5

A final dividend for 2019 of 4.8p per share amounting to £30.4 million has been proposed for approval at the Annual General Meeting, but has not been 
reflected in the financial statements.

This dividend will be paid on 27 January 2020 to those shareholders on the register at close of business on 13 December 2019.

9  Earnings per ordinary share

Basic earnings per share are calculated by dividing the profit/loss attributable to equity shareholders by the weighted average number of ordinary shares in 
issue during the period, excluding treasury shares and those held on trust for employee share schemes.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary 
shares. These represent share options granted to employees where the exercise price is less than the weighted average market price of the Company’s shares 
during the period. 

Underlying earnings per share figures are presented to exclude the effect of exceptional and other adjusting items. The Directors consider that the 
supplementary figures are a useful indicator of performance.

2019

2018

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

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

Basic weighted average number of shares
Dilutive options
Diluted weighted average number of shares

Earnings 
£m
(18.0)
(18.0)

Per share  
 amount  
p
(2.8)
(2.8)

85.6
85.6

13.5
13.4

Earnings  
£m
45.0
45.0

87.9
87.9

2019 
m
632.6
7.6
640.2

Per share 
 amount 
p
7.1
7.0

13.9
13.7

2018 
m
633.1
6.7
639.8

Marston’s PLC Annual Report and Accounts 2019Financial Statements102

Notes continued
For the 52 weeks ended 28 September 2019

10  Goodwill

Cost
At 30 September 2018 and 28 September 2019

Aggregate impairment
At 30 September 2018 and 28 September 2019

Net book amount at 29 September 2018
Net book amount at 28 September 2019

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

£m

231.4

1.1

230.3
230.3

£m

231.4

1.1

230.3
230.3

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 benefits of acquisitions flow to that segment, as follows:

Destination and Premium
Taverns
Brewing

2019 
£m
87.5
113.1
29.7
230.3

2018 
£m
87.5
113.1
29.7
230.3

The key assumptions used in determining value in use are the pre-tax discount rate applied to the cash flow projections of 5% (2018: 5%) and the growth rate 
used to extrapolate the projected cash flows beyond the one year budgets of 2% (2018: 2%). 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 reflect 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.

Marston’s PLC Annual Report and Accounts 201911  Other intangible assets

Cost
At 30 September 2018
Additions
Net transfers to assets held for sale and disposals
At 28 September 2019

Amortisation
At 30 September 2018
Charge for the period
Net transfers to assets held for sale and disposals
At 28 September 2019

Net book amount at 29 September 2018
Net book amount at 28 September 2019

103

Total
£m

76.2
20.3
(1.7)
94.8

6.2
1.5
(1.4)
6.3

70.0
88.5

Acquired 
brands  
£m

Lease 
premiums 
£m

Computer 
software 
£m

Development 
costs  
£m

62.1
–
–
62.1

–
–
–
–

62.1
62.1

1.5 
– 
–
1.5

0.8
–
–
0.8

0.7
0.7

12.5
20.3
(1.7)
31.1

5.3
1.5
(1.4)
5.4

7.2
25.7

0.1
–
–
0.1

0.1
–
–
0.1

–
–

Acquired brands are initially recognised at their fair value on acquisition. Given the anticipated level of investment in acquired brands, and there being no legal 
or regulatory limits to their useful lives, they are regarded as having indefinite useful lives and no annual amortisation is provided.

Lease premiums classified as intangible assets are those acquired with new subsidiaries.

Cost
At 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

–
–

During the prior period there was an impairment of other intangible assets of £0.1 million and a reversal of past impairment of £0.3 million.

Acquired brands relate to Brewing. The carrying value of acquired brands is split as follows:

Wychwood
Jennings
Ringwood
Thwaites
Eagle

2019
£m
13.6
2.8
2.9
12.8
30.0
62.1

Total 
£m

74.4
3.3
(1.5)
76.2

6.8
1.1
(0.2)
(1.5)
6.2

67.6
70.0

2018
£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% (2018: 5%) 
and the long-term growth rate used to extrapolate cash flows beyond the cash flow projection period of one year of 2% (2018: 2%). 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 reflect market conditions.

The above impairment tests demonstrated that the Group had sufficient levels of headroom and as such no impairment of acquired brands was required in the 
current or prior period.

Marston’s PLC Annual Report and Accounts 2019Financial Statements104

Notes continued
For the 52 weeks ended 28 September 2019

12  Property, plant and equipment

Cost or valuation
At 30 September 2018
Additions
Net transfers to assets held for sale and disposals
Revaluation
At 28 September 2019

Depreciation
At 30 September 2018
Charge for the period
Net transfers to assets held for sale and disposals
Revaluation/impairment
At 28 September 2019

Net book amount at 29 September 2018
Net book amount at 28 September 2019

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

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

2,166.1
68.5
(50.1)
(69.9)
2,114.6

2.4
4.4 
–
(0.9)
5.9

2,163.7
2,108.7

84.8
6.5
(4.7)
–
86.6

32.8
7.0 
(4.1)
–
35.7

52.0
50.9

Land and 
buildings  
£m

Plant and 
machinery  
£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

Fixtures, 
fittings, 
tools and 
equipment 
£m

344.7
33.9 
(45.0)
–
333.6

152.3
30.3 
(40.0)
0.2
142.8

192.4
190.8

Fixtures, 
fittings, 
tools and 
equipment 
£m 

331.4
50.6
(37.3)
– 
344.7

158.2
29.0
(35.3)
0.4
152.3

173.2
192.4

2019 
£m
1,814.9
206.7
87.1
2,108.7

2019 
£m
2,054.0
60.6
2,114.6

Total 
£m

2,595.6
108.9 
(99.8)
(69.9)
2,534.8

187.5
41.7
(44.1)
(0.7)
184.4

2,408.1
2,350.4

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

2018 
£m
1,855.5
227.1
81.1
2,163.7

2018 
£m
2,116.5
49.6
2,166.1

If the freehold and leasehold properties had not been revalued, the historical cost net book amount would be £1,627.9 million (2018: £1,624.0 million).

Cost at 28 September 2019 includes £9.9 million (2018: £40.8 million) of assets in the course of construction. 

Interest costs of £1.6 million (2018: £2.7 million) were capitalised in the period in respect of the financing of major projects. The capitalisation rate used was 
5% (2018: 5% to 6%).

Marston’s PLC Annual Report and Accounts 2019105

12  Property, plant and equipment (continued)

The net loss on disposal of property, plant and equipment, intangible assets and assets held for sale was £6.2 million (2018: profit of £7.7 million). A net profit 
on disposal of £7.9 million (2018: £8.3 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 financial statements was £3.5 million (2018: £10.2 million).

The net book amount of land and buildings held under finance leases at 28 September 2019 was £25.5 million (2018: £34.6 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 £348.6 million (2018: £377.1 
million). The net book amount of plant and machinery and fixtures, fittings, tools and equipment held under finance leases was £1.6 million (2018: £nil). The net 
book amount of plant and machinery held as security for bank borrowings was £12.5 million (2018: £3.2 million).

Revaluation/impairment
During the current and prior period various properties were reviewed for impairment and/or material changes in value. These valuation adjustments were 
recognised in the revaluation reserve or the income statement as appropriate.

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 financial statements and the resulting revaluation adjustments were recognised in the revaluation reserve or 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

2019 
£m

(44.8)
0.2
(44.6)

2.8
(27.4)
(24.6)
(69.2)

2018 
£m

(70.6)
31.4
(39.2)

170.3
(161.7)
8.6
(30.6)

An impairment of £43.4 million (2018: £70.6 million) and a reversal of past impairment of £nil (2018: £31.4 million) have been recognised within non-
underlying items (note 4).

Fair value of land and buildings
IFRS 13 ‘Fair Value Measurement’ requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used 
in the measurements, according to the following levels:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities. 
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 
Level 3 – inputs for the asset or liability that are not based on observable market data.

The table below shows the level in the fair value hierarchy into which the fair value measurements of land and buildings have been categorised:

Recurring fair value measurements
Land and buildings:
Specialised brewery properties
Other land and buildings

2019

Level 1 
£m

Level 2 
£m

–
–
–

–
2,054.5
2,054.5

Level 3 
£m

54.2
–
54.2

Total 
£m

Level 1 
£m

Level 2 
£m

Level 3  
£m

Total 
£m

2018

54.2
2,054.5
2,108.7

–
–
–

–
2,110.6
2,110.6

53.1
–
53.1

53.1
2,110.6
2,163.7

In the prior period properties with a value of £5.1 million that were previously categorised within Level 2 were transferred to Level 3 to appropriately reflect 
the valuation basis used in the external property valuation undertaken in the prior 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 significant input relates to the multiplier which, being indirectly observable, is a Level 2 input. Thus it 
has been concluded that since the most significant influence 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 configuration. As such the valuation of these properties has been performed using the depreciated replacement cost approach, which values the 
properties at the current cost of replacing them with their modern equivalents less deductions for physical deterioration and all relevant forms of obsolescence 
and optimisation.

Marston’s PLC Annual Report and Accounts 2019Financial Statements106

Notes continued
For the 52 weeks ended 28 September 2019

12  Property, plant and equipment (continued)

The significant unobservable inputs to the Level 3 fair value measurements are:

Current cost of modern equivalent asset
Amount of adjustment for physical deterioration/obsolescence

Level 3 recurring fair value measurements
At beginning of the period
Additions
Transfers
Revaluation
Depreciation charge for the period
At end of the period

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

2019
£m
53.1
1.5
–
–
(0.4)
54.2

2018
£m
45.5
0.6
5.1
2.3
(0.4)
53.1

The Group’s properties are revalued by external independent qualified valuers at least once in each rolling three year period. The last external valuation of the 
Group’s freehold and leasehold properties was performed as at 28 January 2018. The Group has an internal team of qualified valuers and at each reporting 
date the estate is reviewed for any indication of significant changes in value. Where this is the case internal valuations are performed on a basis consistent with 
those performed externally.

13  Other non-current assets

Trade loans

2019 
£m
9.3

2018
£m
9.6

Upon adoption of IFRS 9 ‘Financial Instruments’ at the start of the current period trade loans were reclassified as financial assets at fair value through profit or 
loss. Under IAS 39 ‘Financial Instruments: Recognition and Measurement’ trade loans were previously classified as loans and receivables and were held at 
amortised cost net of a provision of £1.9 million. 

Further detail regarding the fair value measurement of trade loans is provided in note 25.

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% (2018: 17%). The movement on the deferred tax accounts is shown below:

Net deferred tax liability
At beginning of the period
Adjustment for adoption of IFRS 9
(Credited)/charged to the income statement
(Credited)/charged to equity:
Impairment and revaluation of properties
Hedging reserve
Retirement benefits
Share-based payments
At end of the period

Recognised in the balance sheet
Deferred tax liabilities (after offsetting)
Deferred tax assets (after offsetting)

2019 
£m
81.3
(1.2)
(9.8)

(1.8)
(1.5)
(8.8)
(0.1)
58.1

2019
£m
63.9
(5.8)
58.1

2018 
£m
76.0
–
1.2

(0.1)
1.8
2.4
–
81.3

2018
£m
81.3
–
81.3

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.

Marston’s PLC Annual Report and Accounts 2019Pensions 
£m
2.7
–
(2.7)
–

Pensions
£m
–
0.3
2.4
2.7

Accelerated 
 capital  
allowances  
£m
35.0
3.8
–
38.8

Pensions
£m
–
–
–
(6.1)
(6.1)

Accelerated 
 capital
 allowances
£m
30.2
4.8
–
35.0

Pensions
£m
(0.9)
0.9
–
–

Revaluation 
of properties 
£m
87.7
(5.0)
(1.8)
80.9

Tax losses
£m
(26.4)
–
(0.4)
–
(26.8)

Revaluation
of properties
£m
94.3
(6.5)
(0.1)
87.7

Tax losses
£m
(27.1)
0.7
–
(26.4)

Rolled over 
 capital 
gains 
£m
6.8
(0.3)
–
6.5

Hedging
reserve
£m
(24.3)
–
–
(1.5)
(25.8)

Rolled over 
 capital
 gains
£m
6.1
0.7
–
6.8

Hedging
 reserve
£m
(26.1)
–
1.8
(24.3)

Other 
£m
4.3
0.3
–
4.6

Other
£m
(4.5)
(1.2)
(8.2)
(0.1)
(14.0)

Other
£m
4.0
0.3
–
4.3

Other
£m
(4.5)
–
–
(4.5)

107

Total 
£m
136.5
(1.2)
(4.5)
130.8

Total
£m
(55.2)
(1.2)
(8.6)
(7.7)
(72.7)

81.3
58.1

Total
£m
134.6
(0.4)
2.3
136.5

Total
£m
(58.6)
1.6
1.8
(55.2)

76.0
81.3

14  Deferred tax (continued)

Deferred tax liabilities
At 30 September 2018
Charged/(credited) to the income statement
Credited to equity
At 28 September 2019

Deferred tax assets
At 30 September 2018
Adjustment for adoption of IFRS 9
Credited to the income statement
Credited to equity
At 28 September 2019

Net deferred tax liability
At 29 September 2018
At 28 September 2019

Deferred tax liabilities
At 1 October 2017
Charged/(credited) to the income statement
Charged/(credited) to equity
At 29 September 2018

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

15  Retirement benefits

During the period the Group contributed to a funded defined benefit pension plan and a number of defined contribution pension plans.

Defined contribution plans
Pension costs for defined contribution plans are as follows:

Defined contribution plans

2019
£m
9.8

2018
£m
8.7

Defined benefit plan
The Marston’s PLC Pension and Life Assurance Scheme is a final salary pension plan which provides benefits to members in the form of a guaranteed level of 
pension payable for life. The plan closed to future accrual on 30 September 2014 and the link to future salary increases was also removed. 

The plan operates under the UK regulatory framework and is governed by a board of Trustees composed of plan participants and representatives of the 
Group. The Trustees make investment decisions and set the required contribution rates based on independent actuarial advice. 

The key risks to which the plan exposes the Group are as follows: 

•  Volatility of plan assets 
•  Changes in bond yields
•  Inflation risk
•  Changes in life expectancy

Marston’s PLC Annual Report and Accounts 2019Financial Statements108

Notes continued
For the 52 weeks ended 28 September 2019

15  Retirement benefits (continued)

The movements in the fair value of plan assets and the present value of the defined benefit obligation during the period were:

At beginning of the period
Past service cost
Interest income/(expense)
Remeasurements:
Return on plan assets (excluding interest income)
Effect of changes in financial assumptions
Effect of changes in demographic assumptions
Effect of experience adjustments
Cash flows:
Employer contributions
Administrative expenses paid from plan assets
Benefits paid
At end of the period

        Fair value 

of plan assets

         Present value 
      of defined 
benefit obligation

Net (deficit)/ 
surplus

2019 
£m
516.6
–
14.6

20.3
–
–
–

7.6
(0.9)
(23.8)
534.4

2018 
£m
532.4
–
14.1

(11.7)
–
–
–

8.0
(0.9)
(25.3)
516.6

2019 
£m
(501.0)
(4.6)
(14.1)

–
(86.1)
11.2
–

–
–
23.8
(570.8)

2018 
£m
(537.8)
–
(14.2)

–
16.6
2.9
6.2

–
–
25.3
(501.0)

2019 
£m
15.6
(4.6)
0.5

20.3
(86.1)
11.2
–

7.6
(0.9)
–
(36.4)

2018 
£m
(5.4)
–
(0.1)

(11.7)
16.6
2.9
6.2

8.0
(0.9)
–
15.6

Pension costs recognised in the income statement
A charge of £4.6 million (2018: £nil) comprising the past service cost is included within employee costs, a credit of £0.5 million (2018: charge of £0.1 million) 
comprising the net interest on the net defined benefit asset/liability is included within exceptional finance income/costs and a charge of £0.9 million 
(2018: £0.9 million) comprising the administrative expenses paid from plan assets is included within finance costs.

On 26 October 2018 a High Court ruling indicated that Guaranteed Minimum Pensions must be equalised for men and women. This requirement has been 
reflected in the calculation of the Group’s net defined benefit asset/liability at 28 September 2019 and the resulting additional past service cost of £4.6 million 
has been classed as a non-underlying item (note 4).

An updated actuarial valuation of the plan was performed by Mercer as at 28 September 2019 for the purposes of IAS 19 ‘Employee Benefits’. 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
Inflation assumption (RPI)
Inflation 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

2019
1.8%
2.9%
2.0%
3.0%
2.0%
2.0%

22.8
25.4

21.1
23.4

2018
2.9%
3.1%
2.2%
3.1%
2.1%
2.1%

23.6
26.1

21.8
24.0

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 defined benefit obligation to changes in the principal actuarial assumptions is:

Discount rate
Inflation assumption
Life expectancy

Change in assumption
0.25%
0.25%
One year

Increase in assumption
Decrease by 4.1%
Increase by 2.1%
Increase by 4.3%

Decrease in assumption
Increase by 4.4%
Decrease by 2.0%
Decrease by 4.3%

The above sensitivity analyses have been determined by changing one assumption while holding all other assumptions constant. This is unlikely to be the case 
in practice as changes in some of the assumptions could be correlated. When calculating the above sensitivities the same method has been applied as when 
calculating the net defined benefit asset/liability in the balance sheet i.e. the present value of the defined benefit obligation calculated using the Projected Unit 
Credit Method.

Plan assets
Equities
Bonds/Gilts
Cash/Other
Buy-in policies (matching annuities)

2019 
£m
103.5
162.0
10.0
258.9
534.4

2018 
£m
134.3
191.1
7.6
183.6
516.6

Marston’s PLC Annual Report and Accounts 2019109

15  Retirement benefits (continued)

The actual return on plan assets was a gain of £34.9 million (2018: £2.4 million).

A proportion of the defined benefit obligation has been secured by buy-in policies and as such this proportion of liabilities is matched by annuities.

The Trustees of the plan hold a range of assets and are aiming to better align the cash flows from these to those of the plan. They are also working with the 
Group to de-risk their portfolio further. 

The Group is aiming to eliminate the plan’s funding deficit 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 and may continue until 2031 depending on the plan’s 
funding position. Contributions are also payable in respect of the plan’s expenses. The next triennial valuation will be performed as at 30 September 2020.

The employer contributions expected to be paid during the financial period ending 3 October 2020 amount to £7.6 million.

The weighted average duration of the defined benefit obligation is 17 years.

Post-retirement medical benefits
A loss of £0.1 million (2018: £nil) in respect of the remeasurement of post-retirement medical benefits 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

2019 
£m
10.5
1.4
31.7
43.6

2019 
£m
61.5
25.4
4.0
90.9

2018 
£m
11.2
1.6
31.8
44.6

2018 
£m
66.8
27.9
10.2
104.9

Trade receivables are shown net of a provision of £2.7 million (2018: £1.5 million). Other receivables are shown net of a provision of £9.1 million  
(2018: £4.2 million). Further detail regarding the impairment of trade receivables and other receivables is provided in note 25.

All of the Group’s trade receivables are denominated in pounds sterling. 

At 28 September 2019 the value of collateral held in the form of cash deposits was £6.6 million (2018: £6.7 million).

18  Assets held for sale

Properties

2019 
£m
1.7

2018
£m
2.3

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 identified an 
impairment of £nil (2018: £0.4 million) which has been recognised in the income statement.

Marston’s PLC Annual Report and Accounts 2019Financial Statements110

Notes continued
For the 52 weeks ended 28 September 2019

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

2019 
£m
21.5
32.9
0.8
(0.3)
–
54.9

2019
£m
313.3
712.2
21.1
336.7
0.1
1,383.4

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

Bank borrowings of £9.2 million (2018: £3.2 million) 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.

At 29 September 2018 other borrowings represented the amounts drawn down under the securitisation’s liquidity facility. During the period ended 4 October 
2014 the facility’s provider, the Royal Bank of Scotland Group plc, had its short-term credit rating downgraded below the minimum prescribed in the facility 
agreement and as such the Group exercised its entitlement to draw the full amount of the facility and hold it in a designated bank account. The corresponding 
balance of £120.0 million held in the relevant bank account was included within other cash deposits. During the current period the facility was novated to a 
new provider whose credit rating is above the prescribed minimum and as such the amounts drawn down were repaid.

The Group has 75,000 (2018: 75,000) preference shares of £1 each in issue at the balance sheet date. The preference shares carry the right to a fixed 
cumulative preferential dividend at the rate of 6% per annum (they are also entitled to a non-cumulative dividend of 1% per annum provided that dividends of 
not less than £24,000 have been paid on the ordinary shares in that year). They participate in the event of a winding-up and on a return of capital and carry 
the right to attend and vote at general meetings of the Company, carrying four votes per share.

All of the Group’s borrowings are denominated in pounds sterling. There were no instances of default, including covenant terms, in either the current or 
prior period.

Maturity of borrowings
The maturity profile of the carrying amount of the Group’s borrowings at the period end was as follows:

Due:
Within one year
In more than one year but less than two years
In more than two years but less than five years
In more than five years

Gross  
borrowings  
£m
56.5
38.1
433.5
943.1
1,471.2

2019
Unamortised 
issue costs 
£m
(1.6)
(1.6)
(4.4)
(25.3)
(32.9)

Net  
borrowings  
£m
54.9
36.5
429.1
917.8
1,438.3

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)

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
2019 
£m
338.1
749.4
21.9
361.7
–
0.1
1,471.2

2018 
£m
290.2
781.1
27.6
361.7
120.0
0.1
1,580.7

Fair value

2019 
£m
338.1
725.5
21.9
361.7
–
0.1
1,447.3

Net  
borrowings  
£m
158.4
32.8
397.5
958.7
1,547.4

2018 
£m
290.2
770.0
27.6
361.7
120.0
0.1
1,569.6

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.

Marston’s PLC Annual Report and Accounts 2019111

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 28 September 2019, 26 (2018: 29) of the securitised pubs were sold to third parties and 1 pub (2018: 1) was sold to another 
member of the Group. The carrying amount of the securitised pubs at 28 September 2019 was £1,303.0 million (2018: £1,293.3 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

2019 
£m
18.8
214.0
200.0
161.6
155.0
749.4

2018 
£m
40.1
214.0
200.0
172.0
155.0
781.1

Interest
Floating
Fixed/floating
Fixed/floating
Floating
Fixed/floating

Principal repayment 
period – by instalments
2019 to 2020
2020 to 2027
2027 to 2032
2019 to 2031
2032 to 2035

Expected 
average life
1 year
8 years
13 years
12 years
16 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 floating rate notes are economically hedged in full by the Group using interest rate swaps whereby all interest payments are swapped to fixed 
interest payable.

At 28 September 2019 Marston’s Pubs Limited held cash of £19.7 million (2018: £27.5 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 (2018: £0.1 million) and other cash deposits of £nil (2018: £120.0 
million), which at 29 September 2018 was principally in respect of the amounts drawn down under the liquidity facility.

21  Derivative financial 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

2019 
£m
(184.2)
(51.3)
(235.5)

2018 
£m
(28.9)
(148.6)
(177.5)

2019 
£m
117.9
41.2
74.5
14.7
248.3

2018 
£m
123.2
33.1
82.1
13.8
252.2

Marston’s PLC Annual Report and Accounts 2019Financial Statements112

Notes continued
For the 52 weeks ended 28 September 2019

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

2019 
£m
25.3
(3.5)
4.4
0.4
(4.3)
22.3

2019
£m
2.6
19.7
22.3

2018 
£m
30.2
(3.7)
3.0
0.5
(4.7)
25.3

2018
£m
2.8
22.5
25.3

When valuations of leasehold properties (based on future estimated income streams) give rise to a deficit as a result of onerous lease conditions they are 
recognised as liabilities in provisions. Other contractual property costs are also recorded as provisions as appropriate.

Payments are expected to continue on these properties for periods of 1 to 68 years (2018: 1 to 51 years). 

The £2.3 million (2018: £0.1 million) increase in the provision as a result of updating the discount rate assumptions used in the calculation has been classified as 
a non-underlying item (note 4).

24 Other non-current liabilities

Other liabilities

25 Financial instruments

Financial instruments by category

At 28 September 2019
Assets as per the balance sheet
Trade loans 
Trade receivables (before provision)
Other receivables (before provision)
Other cash deposits
Cash and cash equivalents

At 28 September 2019
Liabilities as per the balance sheet
Derivative financial instruments
Borrowings
Trade payables
Other payables

2019 
£m
2.6

2018
£m
1.5

Assets at 
amortised 
cost 
£m

–
64.2
13.1
2.0
37.6
116.9

Other 
financial 
 liabilities 
£m

–
1,438.3
117.9
14.7
1,570.9

Total  
£m

9.3
64.2
13.1
2.0
37.6
126.2

Total  
£m

235.5
1,438.3
117.9
14.7
1,806.4

Assets at 
fair value 
 through 
 profit or 
 loss 
£m

9.3
–
–
–
–
9.3

Liabilities 
 at fair 
 value 
through 
profit or 
 loss 
£m

184.2
–
–
–
184.2

Derivatives 
 used for 
 hedging 
£m

51.3
–
–
–
51.3

Marston’s PLC Annual Report and Accounts 201925 Financial instruments (continued)

At 29 September 2018
Assets as per the balance sheet
Trade loans (before provision)
Trade receivables (before provision)
Other receivables (before provision)
Other cash deposits
Cash and cash equivalents

At 29 September 2018
Liabilities as per the balance sheet
Derivative financial instruments
Borrowings
Trade payables
Other payables

113

Loans and 
receivables  
£m

11.5
68.3
14.4
120.0
41.4
255.6

Other 
financial 
 liabilities 
£m

–
1,547.4
123.2
13.8
1,684.4

Total  
£m

11.5
68.3
14.4
120.0
41.4
255.6

Total  
£m

177.5
1,547.4
123.2
13.8
1,861.9

Liabilities 
 at fair 
 value 
through 
profit or 
 loss 
£m

28.9
–
–
–
28.9 

Derivatives 
 used for 
hedging 
£m

148.6
–
–
–
148.6

Fair values of financial instruments
The only financial instruments which the Group holds at fair value are trade loans and derivative financial instruments, which are classified as at fair value 
through profit 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 reflects the significance of the inputs used 
in the measurements, according to the following levels:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities. 
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 
Level 3 – inputs for the asset or liability that are not based on observable market data.

The table below shows the level in the fair value hierarchy into which fair value measurements have been categorised:

Assets as per the balance sheet
Trade loans

Liabilities as per the balance sheet
Derivative financial instruments

Level 1 
£m
–

Level 1 
£m
–

Level 2 
£m
–

2019

2019

Level 2 
£m
235.5

Level 3 
£m
9.3

Level 3 
£m
–

Total
£m
9.3

Total 
£m
235.5

Level 1 
£m
–

Level 1 
£m
–

2018

2018

Level 2 
£m
–

Level 2 
£m
177.5

Level 3  
£m
–

Level 3  
£m
–

Total 
£m
–

Total 
£m
177.5

There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior period. Trade loans were reclassified as financial 
assets at fair value through profit or loss upon adoption of IFRS 9 ‘Financial Instruments’ at the start of the current period. Under IAS 39 ‘Financial Instruments: 
Recognition and Measurement’ trade loans were previously classified as loans and receivables and were held at amortised cost. 

The Level 2 fair values of derivative financial instruments have been obtained using a market approach and reflect the estimated amount the Group would 
expect to pay or receive on termination of the instruments, adjusted for the Group’s own credit risk. 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 are highly sensitive to the inputs to the valuations, such as 
discount rates, analysis of credit risk and yield curves. 

The Level 3 fair values of trade loans reflect the loan balances outstanding net of any deemed impairment.

Level 3 recurring fair value measurements
At beginning of the period
Additions
Disposals and repayments
Valuation changes
At end of the period

2019 
£m
9.6
2.6 
(2.7)
(0.2)
9.3

Marston’s PLC Annual Report and Accounts 2019Financial Statements114

Notes continued
For the 52 weeks ended 28 September 2019

25 Financial instruments (continued)

The fair values of all the Group’s other financial instruments are equal to their book values, with the exception of borrowings (note 19). The carrying amount less 
impairment provision of trade receivables and other receivables, and the carrying amount of other cash deposits, cash and cash equivalents, 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 financial risks: market risk (including interest rate risk and foreign currency risk), counterparty risk, credit risk and 
liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse 
effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board. Group Treasury identifies, evaluates 
and hedges financial risks. The Board provides principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, 
credit risk, investment of excess liquidity and use of derivative and non-derivative financial instruments.

Interest rate risk:
The Group’s income and operating cash flows are substantially independent of changes in market interest rates, and as such the Group’s interest rate risk arises 
from its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to 
fair value interest rate risk.

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing 
positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on the income statement of a defined interest rate shift. 
The scenarios are run only for liabilities that represent the major interest-bearing positions.

The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting 
borrowings from floating rates to fixed rates. Generally, the Group raises borrowings at floating rates and will often swap them into fixed rates that are lower 
than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified 
intervals, the difference between fixed contract and floating rate interest amounts calculated by reference to the agreed notional amounts.

If interest rates had been 0.5% higher/lower during the period ended 28 September 2019, with all other variables held constant, the post-tax (loss)/profit for 
the period would have been £1.0 million (2018: £0.8 million) lower/higher as a result of higher/lower interest expense.

Interest rate swaps designated as part of a hedging relationship
The Group uses interest rate swaps to fix the interest rate payable on the floating rate tranches of its securitised debt. The weighted average fixed rate of the 
interest rate swaps designated as hedging instruments at 28 September 2019 was 6.0% (2018: 5.8%).

The interest rate swaps have the same critical terms as the securitised debt including reset dates, payment dates, maturities and notional amounts (note 20). 
The economic relationship between the forecast floating rate interest payments and the interest rate swaps is determined and assessed through quantitative 
hedge effectiveness calculations performed at each reporting date, and upon a significant change in the circumstances affecting the hedge effectiveness 
requirements. As the interest rate swaps have a notional amount profile the same as that of the principal amount profile of the securitised debt on which the 
floating rate interest is paid the hedge ratio is 1:1. Sources of ineffectiveness that might affect the hedging relationships are the Group’s own credit risk, changes 
in the timing and amount of the interest payments and the recouponing of the swaps from a single fixed rate to a stepped profile.

On 27 March 2019 the Group recouponed the interest rate swap that fixes the interest rate payable on the floating rate elements of its A1, A2, A3 and B 
securitised notes. The recouponing has had the effect of reducing the fixed interest rate paid for the next five years and increasing the fixed interest rate paid 
in the final four years of the swap’s term. As a result, the hedging relationship between this interest rate swap and the associated debt ceased to meet the 
qualifying criteria for hedge accounting. The cumulative hedging loss existing in equity at 27 March 2019 remained in equity and is being recognised when the 
forecast transaction is ultimately recognised in the income statement. Fair value movements in respect of this interest rate swap after 27 March 2019 have been 
recognised wholly within the income statement. 

Interest rate swaps designated as part of a hedging relationship
Carrying amount of hedging instruments (included within derivative financial instruments in non-current liabilities)
Change in fair value of hedging instruments used as the basis for recognising hedge ineffectiveness in the period
Nominal amount of hedging instruments
Change in fair value of hedged items used as the basis for recognising hedge ineffectiveness in the period
Hedging reserve balance in respect of continuing hedges
Hedging reserve balance in respect of discontinued hedges
Hedging losses recognised in other comprehensive income
Hedge ineffectiveness losses recognised in profit or loss
Amount reclassified from the hedging reserve to profit or loss in respect of continuing hedges
Amount reclassified from the hedging reserve to profit or loss in respect of discontinued hedges

2019 
£m
51.3
20.8
161.6
(35.3)
(38.6)
(87.3)
(20.5)
(0.3)
7.7
3.5

2018
£m
148.6
0.3
212.1
4.3
(118.1)
–
–
(0.3)
10.9
–

Marston’s PLC Annual Report and Accounts 201925 Financial instruments (continued)

Hedging reserve
At beginning of the period
Hedging losses recognised in other comprehensive income
Amount reclassified from the hedging reserve to profit or loss
Deferred tax on hedging reserve movements
At end of the period

115

2019 
£m
(118.1)
(20.5)
11.2
1.5
(125.9)

2018  
£m
(127.2)
–
10.9
(1.8)
(118.1)

Interest rate swaps not designated as part of a hedging relationship
On 22 March 2012 the Group entered into two forward starting interest rate swaps of £60.0 million each to fix the interest rate payable on the Group’s bank 
borrowings. These interest rate swaps previously fixed 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 prior period the termination date of the swaps was extended to 30 September 2029 and the terms were amended to fix interest at 2.8% until 
30 September 2019 and 3.9% and 4.0% thereafter. 

On 30 October 2017 the Group entered into a forward starting interest rate swap of £60.0 million to fix the interest rate payable on the Group’s bank 
borrowings. This interest rate swap commences on 30 April 2025, fixes interest at 2.2% and terminates on 30 April 2029. 

Following the above recouponing of the interest rate swap that fixes the interest rate payable on the floating rate elements of the A1, A2, A3 and B securitised 
notes and the resulting discontinuance of hedge accounting, fair value movements on this swap after 27 March 2019 have been recognised wholly within the 
income statement.

The interest rate risk profile, after taking account of derivative financial instruments, is as follows:

Borrowings

Floating rate
financial
liabilities
£m
600.3 

2019
Fixed rate
financial
liabilities
£m
870.9 

Total
£m
1,471.2

Floating rate
financial
liabilities
£m
679.5 

2018
Fixed rate
financial
liabilities
£m
901.2

Total
£m
1,580.7

The weighted average interest rate of the fixed rate borrowings was 5.1% (2018: 5.5%) and the weighted average period for which the rate is fixed was 
11 years (2018: 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 significant.

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 significant concentration of counterparty risk in respect of the Group’s pension assets, as these are held with a range of institutions.

Credit risk:
Credit risk is managed on a Group basis. Credit risk arises from credit exposure to customers, including outstanding receivables and committed transactions. 
If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, an assessment is made of the credit quality of the 
customer, taking into account its financial position, past experience and other factors. Individual credit limits are set based on internal or external ratings in 
accordance with limits set by the Board. The utilisation of and adherence to credit limits is regularly monitored. 

The financial assets of the Group which are subject to the new expected credit loss model under IFRS 9 ‘Financial Instruments’ from the start of the current period 
comprise trade receivables and other receivables. Other cash deposits and cash and cash equivalents are also subject to the impairment requirements of 
IFRS 9 however the impairment loss is immaterial.

Marston’s PLC Annual Report and Accounts 2019Financial Statements116

Notes continued
For the 52 weeks ended 28 September 2019

25 Financial instruments (continued)

Trade receivables and other receivables have been grouped as set out below for the purposes of calculating the expected credit losses:

Trade receivables
Amounts due from current pub tenants
Amounts invoiced to non-tenant customers
Miscellaneous trade receivables

Other receivables
Amounts due from previous pub tenants
Amounts due from other property tenants
Miscellaneous other receivables

Expected credit losses have been calculated as follows:

12-month expected credit losses
Lifetime expected credit losses for trade and lease receivables

Gross

Loss allowance

28 September 
2019 
£m

30 September 
2018 
£m

28 September 
2019 
£m

30 September 
2018 
£m

3.1
59.4
1.7
64.2

8.7
0.9
3.5
13.1
77.3

2.4
64.2
1.7
68.3

8.9
2.1
3.4
14.4
82.7

0.1
2.5
0.1
2.7

8.4
0.5
0.2
9.1
11.8

–
3.1
0.1
3.2

8.5
0.5
0.2
9.2
12.4

Gross

Loss allowance

28 September 
2019 
£m
3.5
73.8
77.3

30 September 
2018 
£m
3.4
79.3
82.7

28 September 
2019 
£m
0.2
11.6
11.8

30 September 
2018 
£m
0.2
12.2
12.4

Amounts due from pub tenants
Amounts due from current pub tenants result almost entirely from transactions that are within the scope of IFRS 15 ‘Revenue from Contracts with Customers’ 
or are lease receivables that result from transactions that are within the scope of IFRS 16 ‘Leases’, and as such the loss allowance is calculated as the lifetime 
expected credit losses. After accounting for collateral held in the form of cash deposits and fixtures and fittings the remaining balance due is low and as such 
the expected credit losses are minimal.

Amounts due from previous pub tenants predominantly result from transactions that are within the scope of IFRS 15 or are lease receivables that result from 
transactions that are within the scope of IFRS 16 and as such the loss allowance is calculated as the lifetime expected credit losses. The historical loss rate on 
closed accounts, adjusted to reflect current and forward looking information regarding macroeconomic factors affecting customers’ ability to pay, such as the 
impact of Brexit and forecasts of the UK’s GDP, is used to measure the expected credit losses on these receivables.

Amounts invoiced to non-tenant customers
Amounts invoiced to non-tenant customers result almost entirely from transactions that are within the scope of IFRS 15 and as such the loss allowance is 
calculated as the lifetime expected credit losses. The receivables have been grouped based on the number of months the balance has been outstanding. 
The expected loss rates are based on historical payment profiles of sales and the credit losses incurred thereon. The historical loss rates are adjusted to reflect 
current and forward looking information regarding macroeconomic factors affecting customers’ ability to pay, such as the impact of Brexit and forecasts of the 
UK’s GDP.

The groupings of the gross carrying amounts and the associated expected loss rates are as follows:

At 28 September 2019
Gross carrying amount
Expected loss rate

At 30 September 2018
Gross carrying amount
Expected loss rate

1 
month 
or less 
£m
31.6
0.2%

1 
month 
or less 
£m
40.5
0.3%

1 to 2 
months 
£m
17.5
0.4%

1 to 2 
months 
£m
14.6
0.5%

2 to 3 
months 
£m
3.5
0.7%

2 to 3 
months 
£m
2.2
0.7%

3 to 4  
months 
£m
2.5
1.5%

3 to 4  
months 
£m
1.1
2.7%

4 to 5 
months 
£m
0.1
5.7%

4 to 5 
months 
£m
0.6
19.6%

5 to 6 
months 
£m
0.7
9.1%

5 to 6 
months 
£m
0.5
26.7%

6 to 12 
months 
£m
1.5
35.1%

6 to 12 
months 
£m
1.6
18.4%

12 to 24  
months 
£m
0.5
74.7%

12 to 24  
months 
£m
1.8
68.8%

More 
than 24 
months 
£m
1.5
86.0%

More 
than 24 
months 
£m
1.3
80.9%

Total 
£m
59.4

Total 
£m
64.2

Marston’s PLC Annual Report and Accounts 2019117

25 Financial instruments (continued)

Miscellaneous trade receivables
Miscellaneous trade receivables result almost entirely from transactions that are within the scope of IFRS 15 and as such the loss allowance is calculated as the 
lifetime expected credit losses.

Amounts due from other property tenants
Amounts due from other property tenants are almost entirely lease receivables that result from transactions that are within the scope of IFRS 16 and as such the 
loss allowance is calculated as the lifetime expected credit losses. For tenants where it is considered that there is a significant risk of default the expected credit 
losses are calculated on an individual basis taking into account the circumstances involved. For all other tenants, after accounting for collateral held in the form 
of cash deposits, the remaining balance due is minimal and as such the expected credit losses are immaterial.

Miscellaneous other receivables
Miscellaneous other receivables do not generally result from transactions that are within the scope of IFRS 15 and do not comprise lease receivables resulting 
from transactions that are within the scope of IFRS 16. These receivables are considered to have low credit risk and as such the loss allowance is calculated as 
the 12-month expected credit losses. Receivables are considered to have low credit risk where there is a low risk of default and it is expected that the debtor 
will be able to meet its payment obligations in the near future.

The movements in the loss allowances for trade receivables and other receivables are as follows:

Trade receivables
At beginning of the period (before restatement)
Amounts restated through opening retained earnings
At beginning of the period (after restatement)
Net increase in loss allowance recognised in profit or loss
Amounts written off as uncollectible
At end of the period

Other receivables
At beginning of the period (before restatement)
Amounts restated through opening retained earnings
At beginning of the period (after restatement)
Net increase in loss allowance recognised in profit or loss
Amounts written off as uncollectible
At end of the period

2019 
£m
1.5
1.7
3.2
0.2
(0.7)
2.7

12-month expected 
credit losses

Lifetime expected 
credit losses

2019 
£m
–
0.2
0.2
–
–
0.2

2018 
£m
–
–
–
–
–
–

2019 
£m
4.2
4.8
9.0
0.2
(0.3)
8.9

2018  
£m
1.4
–
1.4
0.6
(0.5)
1.5

2018 
£m
3.3
–
3.3
1.0
(0.1)
4.2

In the prior period under IAS 39 ‘Financial Instruments: Recognition and Measurement’ a provision for impairment of trade receivables, other receivables 
and trade loans was estimated by management and was based on prior experience and known factors at the balance sheet date after taking into account 
collateral held in the form of cash deposits and fixtures and fittings. 

The Group has no significant concentration of credit risk in respect of its customers. The maximum exposure to credit risk at the reporting date is the carrying 
value of each class of receivable.

Liquidity risk:
The Group applies a prudent liquidity risk management policy, which involves maintaining sufficient cash, ensuring the availability of funding through an 
adequate amount of committed credit facilities and having the ability to close out market positions. Due to the dynamic nature of the underlying business, Group 
Treasury maintains the availability of committed credit lines to ensure that the Group has flexibility in funding.

Management monitors rolling forecasts of the Group’s liquidity reserve (comprising undrawn borrowing facilities and cash and cash equivalents) on the basis 
of expected cash flow. In addition, the Group’s liquidity management policy involves maintaining debt financing plans, projecting cash flows and considering 
the level of liquid assets necessary to meet these, and monitoring balance sheet liquidity ratios against internal and external regulatory requirements. The 
Group’s borrowing covenants are subject to regular review.

Marston’s PLC Annual Report and Accounts 2019Financial Statements118

Notes continued
For the 52 weeks ended 28 September 2019

25 Financial instruments (continued)

The tables below analyse the Group’s financial liabilities and non-settled derivative financial instruments into relevant maturity groupings based on the remaining 
period at the balance sheet date to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows.

At 28 September 2019
Borrowings
Derivative financial instruments
Trade payables
Other payables

At 29 September 2018
Borrowings
Derivative financial instruments
Trade payables
Other payables

Less than 
1 year 
£m
115.4
20.3
117.9
14.7
268.3

Less than
1 year
£m
224.5
12.3
123.2
13.8
373.8

Between 1 
and 2 years  
£m
92.8
19.7
–
–
112.5

Between 1
and 2 years
£m
88.9
25.2
–
–
114.1

Between 2 
 and 5 years  
£m
591.4
53.5
–
–
644.9

Between 2
 and 5 years
£m
563.4
61.2
–
–
624.6

Over 
 5 years 
£m
1,603.9
206.8
–
–
1,810.7

Over
 5 years
£m
1,688.2
116.4
–
–
1,804.6

Total  
£m
2,403.5
300.3
117.9
14.7
2,836.4

Total
£m
2,565.0
215.1
123.2
13.8
2,917.1

26 Subsidiary undertakings

Details of the Group’s subsidiary undertakings are provided in note 6 to the Company financial 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 a period 

of continued employment.

(c)  Long Term Incentive Plan (LTIP). Under this scheme nil cost options are granted that will only vest provided the participant satisfies the minimum 

shareholding requirement and performance conditions relating to return on capital, free cash flow 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 benefit from UK 
tax efficiencies. As such, awards made in 2010 and subsequent years may comprise an HMRC approved option (in respect of the first £30,000 worth 
of an award) and an unapproved LTIP award for amounts in excess of this HMRC limit. A further share award (a linked award) is also provided to 
enable participants to fund the exercise of the approved option. This linked award is satisfied by way of shares 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 

2019 
p
102.3
96.0
95.6
112.7
98.2
123.1

2018 
p
117.8
89.0
82.5
117.3
102.3
131.0

Number of shares
2019 
m
7.6
1.5
(0.1)
(1.9)
7.1
0.6
78.7p
 to 136.0p

2018 
m
8.4
4.2
–
(5.0)
7.6
0.7
78.7p
 to 136.0p

2.3

2.8

Marston’s PLC Annual Report and Accounts 2019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

LTIP:
Outstanding at beginning of the period
Granted
Expired
Outstanding at end of the period
Exercisable at end of the period

119

Number of shares
2019 
m
0.3
0.1
0.4
0.1

2018 
m
0.2
0.1
0.3
–

Number of shares
2019 
m
6.7
2.7
(2.2)
7.2
–

2018 
m
6.0
2.3
(1.6)
6.7
–

Weighted average  
exercise price 

2019 
p
–
–
–
–

Weighted average  
exercise price 

2019 
p
–
–
–
–
–

2018 
p
–
–
–
–

2018 
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 significant 
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

2019
7.7 to 7.8
20.7 to 22.5
0.5 to 0.9

2018
7.2 to 7.3
21.2 to 22.5
0.5 to 0.8

3 years
3 years
5 years

3 years
3 years
 5 years

The expected volatility is based on historical volatility over the expected life of the rights. 

The fair value of options granted during the period in relation to the SAYE was 7.9p (2018: 6.4p). The fair value of options granted during the period in relation 
to the deferred bonus scheme was 79.0p (2018: 97.6p). The fair value of options granted during the period in relation to the LTIP was 67.6p (2018: 84.5p).

The weighted average share price for options exercised over the period was 106.8p (2018: 101.7p). The total charge for the period relating to employee 
share-based payment plans was £0.3 million (2018: £0.5 million), all of which related to equity-settled share-based payment transactions. After tax, the total 
charge was £0.2 million (2018: £0.5 million).

28 Equity share capital

Allotted, called up and fully paid
Ordinary shares of 7.375p each:
At beginning and end of the period

2019

Number 
m

Value 
£m

2018

Number 
m

Value 
£m

660.4

48.7

660.4

48.7

Marston’s PLC Annual Report and Accounts 2019Financial Statements120

Notes continued
For the 52 weeks ended 28 September 2019

29 Other components of equity

The merger reserve of £23.7 million (2018: £23.7 million) arose on the issue of ordinary shares in the period ended 30 September 2017 and represents the 
difference between the nominal value of the shares issued and the net proceeds received, less the dividends paid in the prior period.

The capital redemption reserve of £6.8 million (2018: £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.

Shares held on trust for employee share schemes
Treasury shares

2019

2018

Number 
m
1.4
26.3
27.7

Value 
£m
1.7
110.3
112.0

Number 
m
1.4
26.4
27.8

Value 
£m
1.7
110.6
112.3

The market value of own shares held is £36.3 million (2018: £27.5 million). Shares held on trust for employee share schemes represent 0.2% (2018: 0.2%) of 
issued share capital. Treasury shares held represent 4.0% (2018: 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 objectives are to ensure that the Group is able to continue to operate as a going concern and to maximise return to shareholders through a 
combination of capital growth and distributions. The Group seeks to maintain a ratio of debt to equity that both balances risks and returns at an acceptable 
level and retains sufficient funds to comply with lending covenants, achieve working capital targets and meet investment requirements. The Board reviews the 
Group’s dividend policy and funding requirements at least once a year.

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

–
–

–
–

(2.2)
(33.4)
(0.8)
–
–
(36.4)

2.6
32.9
(1.0)
(0.3)
–
34.2
(2.2)

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)

Cash flow 
£m

(3.8)
(3.8)

(118.0)
(118.0)

(19.3)
31.7
7.5
–
120.0
139.9

(28.6)
–
–
–
–
(28.6)
(10.5)

2019 
£m

37.6
37.6

2.0
2.0

(21.5)
(32.9)
(0.8)
0.3
–
(54.9)

(313.3)
(712.2)
(21.1)
(336.7)
(0.1)
(1,383.4)
(1,398.7)

At 29 September 2018 other borrowings represented the amounts drawn down under the securitisation’s liquidity facility. During the period ended 4 October 
2014 the facility’s provider, the Royal Bank of Scotland Group plc, had its short-term credit rating downgraded below the minimum prescribed in the facility 
agreement and as such the Group exercised its entitlement to draw the full amount of the facility and hold it in a designated bank account. The corresponding 
balance of £120.0 million held in the relevant bank account was included within other cash deposits at 29 September 2018. The amounts drawn down could 
only be used for the purpose of meeting the securitisation’s debt service obligations should there ever be insufficient funds available from operations to meet 
such payments. As such these amounts were considered to be restricted cash. During the current period the facility was novated to a new provider whose 
credit rating is above the prescribed minimum and as such the amounts drawn down were repaid.

Included within other cash deposits is an amount of £0.2 million (2018: £0.3 million within cash and cash equivalents) relating to a letter of credit with Royal & 
Sun Alliance Insurance, and an amount of £1.7 million (2018: £1.4 million within cash and cash equivalents) relating to a letter of credit with Aviva. Included 
within cash and cash equivalents is an amount of £6.6 million (2018: £6.7 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).

Marston’s PLC Annual Report and Accounts 201930 Net debt (continued)

Reconciliation of net cash flow to movement in net debt
Decrease in cash and cash equivalents in the period
Decrease in other cash deposits
Cash outflow/(inflow) from movement in debt
Change in debt resulting from cash flows
Non-cash movements and deferred issue costs
Movement in net debt in the period
Net debt at beginning of the period
Net debt at end of the period

Reconciliation of net debt before lease financing to net debt
Cash and cash equivalents
Other cash deposits
Bank borrowings
Securitised debt
Other borrowings
Preference shares
Net debt before lease financing
Finance leases
Other lease related borrowings
Net debt

Changes in liabilities arising from financing activities are as follows:

2019
Derivative 
financial  
instruments  
£m
(177.5)
8.2
(66.2)
–
(235.5)

Total 
financing 
liabilities 
£m
(1,724.9)
119.5
(66.2)
(2.2)
(1,673.8)

 Borrowings  
£m
(1,503.7)
(48.0)
–
4.3
(1,547.4)

 Borrowings 
£m
(1,547.4)
111.3
–
(2.2)
(1,438.3)

At beginning of the period
Cash flow
Changes in fair value
Other changes
At end of the period

31  Working capital and non-cash movements

Working capital movement
Decrease/(increase) in inventories
Decrease in trade and other receivables
Increase/(decrease) 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

121

2018 
£m
(13.2)
–
(48.0)
(61.2)
4.3
(56.9)
(1,329.1)
(1,386.0)

2018
£m
41.4
120.0
(287.3)
(776.3)
(120.0)
(0.1)
(1,022.3)
(27.6)
(336.1)
(1,386.0)

Total 
financing  
liabilities  
£m
(1,691.6)
(34.5)
(3.1)
4.3
(1,724.9)

2018 
£m
(4.4)
4.9
(2.6)
(2.1)

2018
£m
(0.4)
31.7
0.5
31.8

2019 
£m
(3.8)
(118.0)
111.3
(10.5)
(2.2)
(12.7)
(1,386.0)
(1,398.7)

2019
£m
37.6
2.0
(334.8)
(745.1)
–
(0.1)
(1,040.4)
(21.9)
(336.4)
(1,398.7)

2018
Derivative 
financial 
instruments  
£m
(187.9)
13.5
(3.1)
–
(177.5)

2019 
£m
1.0
7.9
1.4
10.3

2019
£m
(0.1)
50.8
0.3
51.0

Further details of movements in respect of property, plant and equipment, assets held for sale and intangible assets are given in notes 11, 12 and 18.

Marston’s PLC Annual Report and Accounts 2019Financial Statements122

Notes continued
For the 52 weeks ended 28 September 2019

32 Operating leases

The Group as lessee
The Group leases various properties and items of 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 five years
In more than five years

2019

2018

Land and 
buildings  
£m
22.6
87.6
480.1
590.3

Other 
£m
1.6
1.0
–
2.6

Land and  
buildings  
£m
20.0
76.7
371.7
468.4

Other 
£m
0.4
0.2
–
0.6

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 classified as operating leases. Future minimum lease rentals receivable under non-cancellable operating leases are as follows:

Due:
Within one year
In more than one year but less than five years
In more than five years

33 Finance leases

2019

2018

Land and 
buildings  
£m 
16.5
49.4
38.9
104.8

Other 
£m
–
–
–
–

Land and  
buildings  
£m 
17.6
55.4
66.4
139.4

Other 
£m
–
–
–
–

The Group leases various properties and items of equipment under finance leases. The leases have various terms, escalation clauses and renewal rights. 
Future minimum lease payments under finance leases are as follows:

Due:
Within one year
In more than one year but less than five years
In more than five years

Future finance charges
Present value of finance lease obligations

The present value of finance lease obligations is as follows:

Due:
Within one year
In more than one year but less than five years
In more than five years
Present value of finance lease obligations

2019 
£m
1.9
6.4
33.7
42.0
(20.1)
21.9

2019
£m
0.8
2.1
19.0
21.9

2018 
£m
8.7
5.1
35.0
48.8
(21.2)
27.6

2018
£m
7.5
0.8
19.3
27.6

34 Contingent liabilities and financial commitments

On 9 August 2005 the Group entered into a Tax Deed of Covenant, which was amended on 22 November 2007, the primary objective of which was to 
ensure that the Group did not trigger a de-grouping liability comprising Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT). This would arise in the 
event of Marston’s Pubs Limited being sold outside the Group, within six years of the relevant asset transfer date for CGT purposes, and within three years of the 
relevant asset transfer date for SDLT purposes. Due to the passage of time and changes in the statutory rate of corporation tax, the total potential de-grouping 
liability now stands at £2.1 million (2018: £2.2 million), all of which relates to CGT.

The Group has issued letters of credit in favour of Royal & Sun Alliance Insurance totalling £0.2 million (2018: £0.3 million) and letters of credit in favour of 
Aviva totalling £2.5 million (2018: £2.1 million) to secure reinsurance contracts. Certain of these letters of credit are secured on fixed 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.

Marston’s PLC Annual Report and Accounts 2019123

35 Change in accounting policy

Adoption of IFRS 9 ‘Financial Instruments’
The Group has adopted IFRS 9 ‘Financial Instruments’ in the current period. Comparative amounts have not been restated in accordance with the transitional 
provisions in paragraph 7.2.15 of the standard. 

At 30 September 2018, the date of initial application of IFRS 9, the Group has assessed which business models apply to each of its financial assets and 
classified them into the appropriate IFRS 9 measurement categories. The changes from the IAS 39 ‘Financial Instruments: Recognition and Measurement’ 
measurement categories are shown in the table below:

Trade loans
Trade receivables
Other receivables
Other cash deposits
Cash and cash equivalents

IAS 39 measurement category
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables

IFRS 9 measurement category
Fair value through profit or loss
Amortised cost
Amortised cost
Amortised cost
Amortised cost

Carrying amount

IAS 39  
£m
9.6
66.8
10.2
120.0
41.4
248.0

IFRS 9 
£m
9.6
65.1
5.2
120.0
41.4
241.3

Under IAS 39 trade loans were classified as loans and receivables and measured at amortised cost. However, as the repayment of the loan principal and/or 
the amount of interest payable generally varies with the number of barrels of beer purchased, these loans do not give rise on specified dates to cash flows that 
are solely payments of principal and interest on the principal amount outstanding. As such under IFRS 9 trade loans are measured at fair value through profit 
or loss.

The adoption of IFRS 9 has also required the Group to revise its impairment methodology for financial assets held at amortised cost and adopt the expected 
credit loss model. This has required the earlier recognition of impairment losses in respect of the Group’s trade receivables and other receivables.

The impact of the change in measurement categories and the adoption of the expected credit loss model is shown in the table below:

At 29 September 2018 (under IAS 39)
Reclassification of trade loans
Impact of adoption of the expected credit loss model
At 30 September 2018 (under IFRS 9)

Amortised  
 cost/  
Loans and  
receivables  
£m
248.0
(9.6)
(6.7)
231.7

Fair value 
 through 
 profit or 
 loss 
£m
–
9.6
–
9.6

Total  
£m
248.0
–
(6.7)
241.3

The adoption of IFRS 9 has not had a material impact on the amounts recognised in the income statement in the current period.

36 Events after the balance sheet date

In November 2019 the Group disposed of a package of 137 pubs for consideration of £44.9 million.

Marston’s PLC Annual Report and Accounts 2019Financial Statements124

Company Balance Sheet
As at 28 September 2019

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
Profit and loss reserves
Total equity

28 September 
2019 
£m

29 September 
2018 
£m

Note

5
6

7
7

8

8
9

13
14
14
14
14
14

375.7
260.9
636.6

389.8
260.9
650.7

561.7
1,049.8
15.9
1,627.4

(767.1)
860.3
1,496.9

(123.6)
(20.9)
1,352.4

48.7
334.0
72.6
23.7
6.8
(112.0)
978.6
1,352.4

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

The profit of the Company for the 52 weeks ended 28 September 2019 was £89.4 million (2018: £211.5 million).

The financial statements were approved by the Board and authorised for issue on 27 November 2019 and are signed on its behalf by:

Ralph Findlay 
Chief Executive Officer

27 November 2019

Company registration number: 31461

Marston’s PLC Annual Report and Accounts 2019Company Statement of Changes in Equity
For the 52 weeks ended 28 September 2019

At 30 September 2018
Profit for the period
Revaluation of properties
Deferred tax on properties
Total comprehensive (expense)/income
Share-based payments
Sale of own shares
Transfer to profit and loss reserves
Dividends paid
Total transactions with owners
At 28 September 2019

At 1 October 2017
Profit 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 profit and loss reserves
Dividends paid
Total transactions with owners
At 29 September 2018

Equity  
 share  
 capital  
£m
48.7
–
–
–
–
–
–
–
–
–
48.7

Equity  
 share  
capital  
£m
48.7
–
–
–
–
–
–
–
–
–
–
48.7

Share 
premium 
account  
£m
334.0
–
–
–
–
–
–
–
–
–
334.0

Share  
premium 
account  
£m
334.0
–
–
–
–
–
–
–
–
–
–
334.0

Revaluation 
reserve 
£m
78.9
–
(2.5)
(2.8)
(5.3)
–
–
(1.0)
–
(1.0)
72.6

Revaluation 
reserve 
£m
77.3
–
(1.5)
3.8
2.3
–
–
–
(0.7)
–
(0.7)
78.9

Merger 
 reserve 
£m
23.7
–
–
–
–
–
–
–
–
–
23.7

Merger 
 reserve 
£m
71.2
–
–
–
–
–
–
–
–
(47.5)
(47.5)
23.7

Capital  
redemption 
reserve  
£m
6.8
–
–
–
–
–
–
–
–
–
6.8

Capital  
redemption 
reserve  
£m
6.8
–
–
–
–
–
–
–
–
–
–
6.8

Own 
 shares  
£m
(112.3)
–
–
–
–
–
0.3
–
–
0.3
(112.0)

Own 
 shares  
£m
(111.3)
–
–
–
–
–
(1.2)
0.2
–
–
(1.0)
(112.3)

Profit 
and loss 
 reserves 
£m
935.6
89.4
–
–
89.4
0.3
(0.2)
1.0
(47.5)
(46.4)
978.6

Profit 
and loss 
 reserves 
£m
723.1
211.5
–
–
211.5
0.5
–
(0.2)
0.7
–
1.0
935.6

125

Total 
equity 
£m
1,315.4
89.4
(2.5)
(2.8)
84.1
0.3
0.1
–
(47.5)
(47.1)
1,352.4

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

Marston’s PLC Annual Report and Accounts 2019Financial Statements126

Notes
For the 52 weeks ended 28 September 2019

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 office is Marston’s House, 
Brewery Road, Wolverhampton, WV1 4JT.

Basis of preparation
These financial 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 financial statements are prepared in sterling, which is the functional currency of the Company. Monetary amounts in these financial statements are rounded 
to the nearest £0.1 million.

The financial statements have been prepared under the historical cost convention modified to include the revaluation of freehold and leasehold properties and 
the holding of certain financial 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 financial statements, which are intended to give 
a true and fair view of the assets, liabilities, financial position and profit 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 flows and related notes and disclosures;
•  Section 11 ‘Basic Financial Instruments’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument not 

measured at fair value through profit or loss, and information that enables users to evaluate the significance of financial instruments;

•  Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.

These financial 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 profit and loss account has been presented for the Company.

At the time of approving the financial 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 
financial 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 profit for the period. Taxable profit differs from net profit 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 profits. 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 profit nor the accounting profit.

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 sufficient taxable 
profits 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 profit 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, fittings, plant and equipment are stated at cost.
•  Depreciation is charged to the profit and loss account on a straight-line basis to provide for the cost or valuation of the assets less their residual values over 

their useful lives.

•  Freehold properties are depreciated to their residual values over 50 years.
•  Leasehold properties are depreciated to their residual values over the lower of the lease term and 50 years.
•  Fixtures, fittings, 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 qualified 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.

Marston’s PLC Annual Report and Accounts 2019127

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 profit and loss account. Surpluses on revaluation are recognised in the revaluation 
reserve, except to the extent they reverse previously charged impairment losses, in which case the reversal is recorded in the profit and loss account.

Disposals of fixed assets
Profit/loss on disposal of fixed assets represents net sale proceeds less the carrying value of the assets. Any element of the revaluation reserve relating to the 
fixed assets disposed of is transferred to profit 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 financial 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 financial 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 financial assets
Basic financial 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 financial assets
Derivatives, including interest rate swaps, are not basic financial assets and are accounted for as set out below.

Financial assets, other than those held at fair value through profit or 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 financial 
asset, the estimated future cash flows 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 flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit 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 profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Company transfers the 
financial asset and substantially all the risks and rewards of ownership to another entity.

Financial liabilities and equity instruments are classified 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 financial liabilities
Basic financial 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 financial liabilities
Derivatives, including interest rate swaps, are not basic financial 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 financial instruments to hedge the Group’s exposure to fluctuations in interest rates. Derivative financial instruments are initially 
recognised in the balance sheet at fair value and are subsequently remeasured to their fair value at each balance sheet date. The Company has not 
designated any derivative financial instruments as hedging instruments and as such any gains or losses on remeasurement are recognised in the profit and loss 
account immediately.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.

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

Assets held under finance 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 finance lease obligation. Lease payments are treated as consisting of capital 
and interest elements. The interest is charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of 
the liability.

Marston’s PLC Annual Report and Accounts 2019Financial Statements128

Notes continued
For the 52 weeks ended 28 September 2019

1  Accounting policies (continued)

Rentals payable under operating leases, including any lease incentives received, are charged to the profit 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 benefits from the leased 
asset are consumed.

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 
classified 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 profit 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 outflow of economic benefits 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 reflects current market assessments of the time value of money and the risks specific to the obligation for which the estimates of future cash flows 
have not been adjusted. When a provision is measured at present value the unwinding of the discount is recognised as a finance cost in profit or loss in the 
period it arises.

When valuations of leasehold properties (based on future estimated income streams) give rise to a deficit as a result of onerous lease conditions they are 
recognised as provisions. 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 financial statements when they have been approved by the shareholders. 
Interim dividends are recognised when paid.

Preference shares
Preference shares are treated as borrowings, and dividends payable on those preference shares are charged as interest in the profit and loss account.

Group undertakings
There is an intra group funding agreement in place between the Company and certain other members of the 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 significant effect on amounts recognised in the financial statements:

Lease classification
In determining whether a lease is classified as an operating lease or finance 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.

Deferred tax
There is judgement inherent in certain tax elections and claims that can be made by the Company in future periods which could materially reduce the level of 
deferred tax recognised in the accounts.

Marston’s PLC Annual Report and Accounts 2019129

2  Judgements and key sources of estimation uncertainty (continued)

Key sources of estimation uncertainty
The following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities:

Tangible fixed 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.

The useful lives and residual values of the Company’s tangible fixed 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 reflect 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 fixed 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, inflation rates and 
discount rates. The assumptions made reflect 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 financial statements. Fees paid 
to the Company’s Auditors for non-audit services to the Company itself are not required to be disclosed as the Group financial statements disclose such fees on 
a consolidated basis.

4  Employees

The average monthly number of people employed by the Company during the period excluding Directors was nil (2018: nil).

5  Tangible fixed assets

Cost or valuation
At 30 September 2018
Additions
Revaluation
Disposals
At 28 September 2019

Depreciation
At 30 September 2018
Charge for the period
Revaluation
Disposals
At 28 September 2019

Net book amount at 29 September 2018
Net book amount at 28 September 2019

Land and 
buildings  
£m

361.1
6.5
(11.6)
(5.8)
350.2

1.2 
2.0 
(0.2)
–
3.0

359.9
347.2

Fixtures, 
fittings, 
plant and 
equipment  
£m

45.6 
2.6 
–
(2.0)
46.2

15.7 
3.7 
–
(1.7)
17.7

29.9
28.5

Total  
£m

406.7 
9.1 
(11.6)
(7.8)
396.4

16.9 
5.7 
(0.2)
(1.7)
20.7

389.8
375.7

Marston’s PLC Annual Report and Accounts 2019Financial Statements130

Notes continued
For the 52 weeks ended 28 September 2019

5  Tangible fixed assets (continued)

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

2019 
£m
254.5
67.9
24.8
347.2

2018 
£m
265.6
69.4
24.9
359.9

If the land and buildings had not been revalued, the historical cost net book amount would be £262.8 million (2018: £272.0 million).

Interest costs of £nil (2018: £0.1 million) were capitalised in the period in respect of the financing of major projects.

Capital expenditure authorised and committed at the period end but not provided for in the financial statements was £0.4 million (2018: £1.4 million).

The net book amount of land and buildings held under finance leases at 28 September 2019 was £25.5 million (2018: £26.9 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 £120.6 million 
(2018: £125.8 million). The net book amount of fixtures, fittings, plant and equipment held under finance leases was £0.5 million (2018: £nil). The net book 
amount of fixtures, fittings, plant and equipment held as security for bank borrowings was £7.0 million (2018: £nil).

The Company has charged property with a value of £4.9 million (2018: £4.9 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
During the current period various properties were reviewed for impairment and/or material changes in value. These valuation adjustments were recognised in 
the revaluation reserve or profit and account as appropriate.

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 financial statements and the resulting revaluation adjustments were recognised in the revaluation reserve or profit and loss account 
as appropriate.

The impact of the revaluations/impairments described above is as follows:

Profit and loss account:
Impairment
Reversal of past impairment

Revaluation reserve:
Unrealised revaluation surplus
Reversal of past revaluation surplus

Net decrease in shareholders’ equity/tangible fixed assets

6  Fixed asset investments

Cost
At 30 September 2018
Capital contribution in respect of equity-settled share-based payments
At 28 September 2019

Impairments
At 30 September 2018
Charged in the period
At 28 September 2019

Net book amount at 29 September 2018
Net book amount at 28 September 2019

2019 
£m

(8.9)
–
(8.9)

–
(2.5)
(2.5)
(11.4)

2018 
£m

(16.9)
3.0
(13.9)

23.7
(25.2)
(1.5)
(15.4)

Subsidiary 
undertakings  
£m

261.4 
0.3
261.7

0.5
0.3
0.8

260.9
260.9

Marston’s PLC Annual Report and Accounts 20196  Fixed asset investments (continued)

These financial statements are separate company financial statements for Marston’s PLC.

The Company had the following subsidiary undertakings at 28 September 2019:

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
Marston’s Acquisitions Limited

Marston’s Corporate Holdings Limited
Marston’s Issuer PLC
Marston’s Issuer Parent Limited
Bedford Canning Company 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
Mansfield Brewery Limited
Mansfield Brewery Properties Limited
Mansfield 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
Pub retailer
Holding company
Telecommunications
Pub retailer and brewer
Insurance
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
Dormant

Dormant

Class of share
Ordinary 25p
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £5
Ordinary £1
Ordinary 25p
Preference £1
Ordinary £1
Ordinary £1
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 25p
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%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

131

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 office 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 office of Banks’s Brewery Insurance Limited is PO Box 33, Dorey 
Court, Admiral Park, St Peter Port, Guernsey, GY1 4AT. The registered office 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 financial 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 financial 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.

Marston’s PLC Annual Report and Accounts 2019Financial Statements132

Notes continued
For the 52 weeks ended 28 September 2019

7  Debtors

Amounts falling due within one year
Amounts owed by Group undertakings
Derivative financial instruments
Prepayments and accrued income
Other debtors

Amounts falling due after more than one year
12.5% subordinated loan owed by Group undertaking

8  Creditors

Amounts falling due within one year
Amounts owed to Group undertakings
Bank borrowings
Finance leases
Other lease related borrowings
Corporation tax
Derivative financial instruments
Accruals and deferred income

Amounts falling due after more than one year
Bank borrowings
Finance leases
Other lease related borrowings
Preference shares
Accruals and deferred income
Other creditors

2019 
£m
520.5
40.5
0.2
0.5
561.7

2019
£m
1,049.8

2019 
£m
707.8
1.0
0.6
(0.1)
9.4
40.5
7.9
767.1

2019
£m
3.0
20.4
88.1
0.1
11.5
0.5
123.6

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

The preference shares carry the right to a fixed 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 five years from the balance sheet date on debts repayable by instalments was £107.6 million 
(2018: £107.8 million). Debts of £0.1 million (2018: £0.1 million) were repayable otherwise than by instalments after more than five years from the balance 
sheet date.

9  Provisions for liabilities and charges

At 30 September 2018
Provided in the period
Released in the period
Unwinding of discount
Utilised in the period
Adjustment for change in discount rate
Credited to profit and loss
Charged to other comprehensive income
At 28 September 2019

Deferred 
tax 
£m
19.2
–
–
–
–
–
(4.8)
2.8
17.2

Property 
leases 
£m
3.9
0.9
(0.5)
0.1
(1.0)
0.3
–
–
3.7

Total  
£m
23.1
0.9
(0.5)
0.1
(1.0)
0.3
(4.8)
2.8
20.9

Payments are expected to continue in respect of these property leases for periods of 1 to 25 years (2018: 1 to 26 years).

Marston’s PLC Annual Report and Accounts 20199  Provisions for liabilities and charges (continued)

Deferred tax
The amount provided in respect of deferred tax is as follows:

Excess of capital allowances over accumulated depreciation
Property related items

10  Financial instruments

Carrying amount of financial assets
Measured at fair value through profit or loss

Carrying amount of financial liabilities
Measured at fair value through profit or loss

133

2018 
£m
6.1
13.1
19.2

2018
£m
28.1

2018
£m
28.1

2019 
£m
6.1
11.1
17.2

2019
£m
40.5

2019
£m
40.5

The only financial 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 reflect 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 28 September 2019 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 but less than five years
In more than five years

12  Finance lease obligations

2019 
£m
7.0
25.0
71.9
103.9

2018 
£m
6.6
23.2
70.4
100.2

The Company leases various properties and items of equipment under finance leases. The leases have various terms, escalation clauses and renewal rights. 
Future minimum lease payments under finance leases are as follows:

Due:
Within one year
In more than one year but less than five years
In more than five years

Future finance charges
Present value of finance lease obligations

13  Equity share capital

Allotted, called up and fully paid
Ordinary shares of 7.375p each

2019 
£m
1.7
5.6
33.7
41.0
(20.0)
21.0

2018 
£m
1.3
5.1
35.0
41.4
(21.1)
20.3

2019

2018

Number 
m
660.4

Value 
£m
48.7

Number 
m
660.4

Value 
£m
48.7

Marston’s PLC Annual Report and Accounts 2019Financial Statements134

Notes continued
For the 52 weeks ended 28 September 2019

14  Reserves

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 profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in the 
revaluation reserve; such gains and losses are recognised in profit or loss. The associated deferred tax on revaluations is also recognised in the revaluation 
reserve. Amounts representing the equivalent depreciation are transferred to profit 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 period ended 30 September 2017 and represents the difference between the nominal value of 
the shares issued and the net proceeds received, less the dividends paid in the prior period.

The capital redemption reserve arose on share buybacks.

Details of own shares are provided in note 29 to the Group financial statements.

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 certain of its banking facilities and the obligations of Marston’s Estates Limited under various 
property leases.

Marston’s PLC Annual Report and Accounts 2019Additional Information

Marston’s PLC Annual Report and Accounts 2019

135

Additional Information

Information for Shareholders 
Glossary 
Pub-restaurants and lodges completed 
during the period 

136
139

140

136

Information for Shareholders

Annual General Meeting (AGM)

The Company’s AGM will be held on 24 January 2020 at 11:00am at Wolverhampton Wanderers Football Club, Molineux Stadium, Waterloo Road, 
Wolverhampton, WV1 4QR.

Financial calendar
Ex-dividend date for final dividend
Record date for final dividend
AGM and Interim Management Statement
Final dividend payment date
Half-year results
Ex-dividend date for interim dividend
Interim dividend payment date
Full-year results

These dates are indicative only and may be subject to change.

The Marston’s website

12 December 2019
13 December 2019
24 January 2020
27 January 2020
13 May 2020
May 2020
July 2020
28 November 2020

Shareholders are encouraged to visit our website www.marstons.co.uk for further information about the Company. The dedicated Investors section on the 
website contains information specifically for shareholders, including share price information, historical dividend amounts and payment dates together with this 
year’s (and prior years’) Annual Report and Accounts.

Registrars

The Company’s shareholder register is maintained by our Registrar, Equiniti. If you have any queries relating to your Marston’s PLC shareholding you should 
contact Equiniti directly by one of the methods below:

Online: 

help.shareview.co.uk – from here you will be able to securely email Equiniti with your query

Telephone: 

0371 384 2274*

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 public holidays in England and Wales.

Dividend payments

By completing a bank mandate form, dividends can be paid directly into your bank or building society account. Those selecting this payment method will 
benefit from receiving cleared funds in their bank account on the payment date, avoiding postal delays and removing the risk of any cheques being lost in the 
post. To change how you receive your dividends contact Equiniti or visit www.shareview.co.uk

Duplicate documents

If you have received two or more sets of the documents concerning the AGM this means that there is more than one account in your name on the shareholder 
register, perhaps because either your name or your address appear on each account in a slightly different way. If you think this might be the case and would 
like to combine your accounts, please contact Equiniti.

Moving house?

It is important that you notify Equiniti of your new address as soon as possible. If you hold 2,500 shares or fewer, and reside in the UK, this can be done quickly 
over the telephone. However, for holdings greater than 2,500 shares your instruction will need to be in writing, quoting your full name, shareholder reference 
number (if known), previous address and new address.

Marston’s PLC Annual Report and Accounts 2019137

Electronic communications

Changes in legislation in recent years allow the Company to use its corporate website as the main way to communicate with shareholders. Annual Report and 
Accounts are only sent to those shareholders who have opted to receive a paper copy. Registering to receive shareholder documentation from the Company 
electronically will allow shareholders to:

•  view the Annual Report and Accounts on the day it is published;
•  receive an email alert when the Annual Report and Accounts and any other shareholder documents are available;
•  cast their AGM votes electronically; and
•  manage their shareholding quickly and securely online, through www.shareview.co.uk

This reduces our impact on the environment, minimises waste and reduces printing and mailing costs. For further information and to register for electronic 
shareholder communications visit www.shareview.co.uk

Buying and selling shares in the UK

If you wish to buy or sell Marston’s PLC shares and hold a share certificate, you can:

•  use the services of a stockbroker or high street bank; or
•  use a telephone or online service.

If you sell your shares in this way you will need to present your share certificate at the time of sale. Details of low cost dealing services may be obtained from 
www.shareview.co.uk or 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.

Ordinary shares

Range of shareholding

Balance ranges
1–1,000
1,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–9,999,999,999
Totals

Total number 
of holdings
3,613
4,024
1,026
205
104
8,972

Percentage 
of holders
40.27%
44.84%
11.44%
2.29%
1.16%
100.00%

Total number 
of shares
1,499,924
15,511,166
28,023,591
73,033,742
542,293,771
660,362,194

Percentage  
issued capital
0.23%
2.35%
4.24%
11.06%
82.12%
100.00%

An analysis of the register by shareholder type can be found in the Governance section on page 51.

Company details

Registered office: 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 (until December 2019, thereafter KPMG will be appointed)  
KPMG LLP, One Snowhill, Snowhill Queensway, Birmingham, B4 6GH

Advisers 

JP Morgan Cazenove, 20 Moorgate, London, EC2R 6DA

Numis Securities Limited, The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT

Solicitors

Freshfield 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

Additional InformationMarston’s PLC Annual Report and Accounts 2019138

Information for Shareholders continued

Share fraud warning

Share fraud includes scams where investors are called out of the blue and offered an inflated 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 profits are promised, those who 
buy or sell shares in this way usually lose their money. The Financial Conduct Authority (FCA) has found most share fraud victims are experienced investors who 
lose an average of £20,000, with around £200 million lost in the UK each year.

If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company or research reports, you should take 
these steps before handing over any money:

•  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 firm.
•  Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact details on the Register or you are told they are out of date.
•  Search the FCA list of unauthorised firms and individuals to avoid doing business with.

Remember, if it sounds too good to be true, it probably is.

If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial Ombudsman Service or Financial Services 
Compensation Scheme if things go wrong.

If you are approached about a share scam you should tell the FCA using the share fraud reporting form at www.fca.org.uk, where you will find out about the 
latest investment scams. You can also call the Consumer Helpline on 0800 111 6768.

Marston’s PLC Annual Report and Accounts 2019Glossary

139

Apprenticeship Levy A compulsory tax on employers to help fund the 
development and delivery of apprenticeships

Like-for-like Sales this year compared to sales in the previous year, of the 
some pubs trading in both periods, expressed as a percentage

BBPA British Beer & Pub Association – a body representing Britain’s brewers 
and pub companies

Low and no-alcohol No more than 1.2% abv and no more than 
0.05% abv, respectively

Beer Quality Technician Our BQTs provide equipment, repairs and quality 
training for pubs and bars

CGA Data and insight provider 

Coffer Peach Business Tracker Sales data for the UK eating and drinking 
out market

Critical role turnover The number of times the person in a critical 
role changes

MBC Marston’s Beer Company, internal division 

MRO Market rent only – as defined in The Pubs Code

MW Megawatt – a measure of electric power

National Living Wage Government minimum pay requirements for 25s 
and over

National Minimum Wage Government minimum pay requirements for 
under 25s

CROCCE Cash Return on Cash Capital Employed – calculated in the same 
way as ROC

NED Non-executive Director

CR Corporate Responsibility – businesses’ response to their impact on society

CWBB Charles Wells Beer Business

EBIT Earnings before interest and tax

EBITDA Earnings before interest, tax, depreciation and amortisation

EBITDAR Earnings before interest, tax, depreciation, amortisation and 
restructuring or rent

Net cash flow Cash inflows and outflows in a given period

Net zero Balance of carbon emissions with carbon removal or eliminating 
carbon emissions altogether

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

On time in full Fulfilling 100% of order requirements within agreed timeframe

EHO Environmental Health Officer

EPOS Electronic point of sale

EPS Earnings per share

ESG Environmental, Social and Governance

Packaged Includes bottles and cans

PBT Profit before tax

PBA Premium bottled ale

PCA Pubs Code Adjudicator

EU Emissions Trading Scheme First large greenhouse gas emissions trading 
scheme, a major pillar of the EU Energy policy

EV Electric vehicle

Export Anything sold outside the UK

FCF Free cash flow – operating cash flow 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

GWE Biogas plant Food waste processing plant

Happiness score Measure of guest satisfaction used in our pubs and bars

PCDR Performance, Career and Development Review

Primary logistics Delivery to off-trade and on-trade depots

Rapid electrical vehicle chargers Fast charging network for electric vehicles

Retail logistics Delivery direct to our pubs

RevPAR Revenue per available room

ROC Return on capital – a measure of how effectively we use the capital 
invested in our business

SEDEX Supplier Ethical Data Exchange – membership organisation for 
auditing supply chains

Streamlined Energy and Carbon Reporting Regulation Mandatory 
reporting regulation framework for businesses which aims to increase 
productivity and energy efficiency

IPA Indian pale ale

The Pubs Code Statutory regulation effective 21 July 2016

IRI Market research provider for consumer and retail insight

Kantar Data and insight consultancy

kW Kilowatt – a measure of electric power

IGD Data and insight provider for food and grocery industry

LPG Liquefied petroleum gas, used as a fuel in heating appliances, cooking 
equipment and vehicles

TSR Total shareholder return – a combination of share price appreciation 
and dividends paid 

United Nations Sustainable Development Goals See website 
sustainabledevelopment.un.org

Venture Pubs Tenanted and leased pubs

Ways of Working (WoW) Marston’s values and principles that guide our 
expected behaviours and actions

Additional InformationMarston’s PLC Annual Report and Accounts 2019140

Pub-restaurants and lodges completed during the period

Scotland
Camperdown Elm, Dundee

North
Flying Squirrel, Bradford

Midlands
Paisley Pear, Brackley (and lodge)

South
Copper Coast, Camborne

Dragonfly, Basingstoke

Oakingham Belle, Wokingham

Smugglers Cove, Clacton (and lodge)

Turing Key, Bletchley

Marston’s PLC Annual Report and Accounts 2019Designed and produced by Radley Yeldar | ry.com 

This report has been printed on materials that are FSC Certified and sourced from 
a mill which is ISO14001 accredited.

The report is printed by an FSC and ISO14001 certified printer, using vegetable oil 
based inks and an alcohol free process.

Marston’s PLC

Marston’s House, Brewery Road,  
Wolverhampton WV1 4JT

Telephone 01902 711811 
Registered No. 31461