Marston’s PLC
Annual Report
and Accounts
2020
Marston s PLC Annual Report and Accounts 2020
’
1
For all of us, this has been an incredibly challenging
year. The COVID-19 global pandemic has created
a huge amount of worry, stress and uncertainty
across our business, and in our personal lives. I never
imagined a time that would see the closure of our entire
pub estate, nor that varying restrictions would remain
in place as we continue to navigate our way through
this crisis.
I am immensely proud and inspired by the response
of our people in these very challenging circumstances.
We pulled together, shared experiences and applied
our knowledge and skills to close and reopen our pubs
safely, for our people and our guests. Our people
played their part and, along with key workers across
the nation, and many members of the communities
within which we live and work, went ‘above and
beyond’ to help others at this time of need. I am
extremely grateful and offer a personal message
of thanks to you all.
Ralph Findlay
Chief Executive Officer
2
Marston s PLC Annual Report and Accounts 2020
’
A Snapshot of 2020
For the 53 weeks ended 3 October 2020
Total revenue
Total (loss)/profit before tax
Basic (Loss)/earnings per share
Net cash flow
Underlying
2020
£821.0m
£(22.0)m
(1.7)p
£50.5m
2019
£1,173.5m
£95.1m
12.7p
£(10.5)m
Total
2020
£821.0m
£(397.1)m
(56.8)p
£50.5m
2019
£1,173.5m
£(20.1)m
(2.8)p
£(10.5)m
Resilient trading performance
post reopening
Response to COVID-19 prioritised
safety, livelihoods, pub ambience,
fnancial sustainability
-
–
Lower debt – net borrowings
before joint venture completion
c.£50m lower than 2019
Transformational Carlsberg
joint venture completed
30 October 2020
Signifcant cash headroom post
joint venture completion, further
debt reduction targeted
Future strategy: focused
pub business well placed as
market recovers
Notes:
The results above reflect the total performance of the Group including discontinued operations. These results are detailed in the Group Income
Statement on page 84 and note 8 on page 102.
The underlying results reflect the performance of the Group before non-underlying items. The Directors consider that these figures provide a useful
indication of the underlying performance of the Group. A reconciliation between the underlying results and the statutory numbers can be found in the
Group Income Statement on page 84.
The Strategic Report, outlined from the inside front cover to page 43 incorporates: A Message of Thanks, A Snapshot
of 2020, At a Glance, Our Business Model, Chairman’s Statement, Stakeholder Engagement, Chief Executive’s
Statement, Our Market Environment, Our Strategy, Our Key Performance Indicators, Group Operating and Financial
Review, Risks and Risk Management, Our Principal Risks and Uncertainties, Our Levels of Defence, Managing and
Nurturing our Resources and Relationships, Non-Financial Information Statement and Section 172 (1) Statement.
By order of the Board
Ralph Findlay
Chief Executive Officer
10 December 2020
In this year’s report
Strategic Report
A Message of Thanks
A Snapshot of 2020
At a Glance
Our Business Model
Chairman’s Statement
Stakeholder Engagement
Chief Executive’s Statement
Our Market Environment
Our Strategy
Our Key Performance Indicators
Group Operating and Financial Review
Risks and Risk Management
Our Principal Risks and Uncertainties
Our Levels of Defence
Managing and Nurturing our Resources and Relationships
Non-Financial Information Statement
Section 172 (1) Statement
Governance
Chairman’s Introduction
Board of Directors
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report:
Annual Statement by Chairman
Remuneration Summary 2019/20
Annual Report on Remuneration
Directors’ Report
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditor’s 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
1
2
4
6
8
9
10
12
13
16
18
21
22
28
30
42
43
45
46
48
52
56
59
59
63
64
72
74
76
84
85
86
87
88
89
132
133
134
146
149
Our Business
Model
Pages 6–7
Our KPIs
Pages 16–17
Directors’
Remuneration
Report
Pages 59–71
Find out more online
For a full year-end press release, preliminary results presentation
and webcast, visit: www.marstons.co.uk/investors
3
Market
Environment
and Strategy
Pages 12–15
Our Resources
and
Relationships
Page 00-00
Pages 30–41
Financial
Statements
Page 76–144
Marston’s PLC Annual Report and Accounts 2020Strategic Report
4
At a Glance
Marston’s has around 9,400 employees and a diverse estate of over 1,350 pubs
and bars that allows us to offer something for every guest, in each of the communities
within which we operate.
For the first time in our long history, we are a focused pub operator, with a culture that
places guests at the heart of everything we do.
Pubs and Bars
• Larger food-led managed pubs, premium bars and restaurants,
Pubs and Bars
accommodation.
• Typical guests: value seekers or those looking for a premium experience.
• Community and independently run pubs, either managed, franchised or
tenanted, often more wet-led in their format/offer.
1,365
• Great pubs that maximise the abilities of skilled entrepreneurs, with a
Rooms
licensee who connects with their community.
• Typical guests: those wanting to enjoy a drink, socialise and be
entertained with people from their community.
• Majority of pubs estate in suburban locations, with 27 pubs in city centres;
less exposure to impact of COVID-19 on footfall in city centres.
1,665
Pubs and Bars revenue
£515.5m
Pubs and Bars underlying operating proft
£84.7m
Locations
18
Brewing revenue
£305.5m
Brewing underlying operating proft
£17.3m
Brewing*
• Six breweries producing a wide portfolio of cask, keg and
packaged beers.
• Key brands: Pedigree, Hobgoblin, Wainwright and Shipyard, and
licensed brands including Estrella Damm.
• Local provenance in regional markets with Banks’s, Jennings, Mansfield,
Ringwood, Brakspear and Eagle.
• Typical consumers: discerning and knowledgeable drinker at home and
away from home (in pubs, clubs and bars).
* Brewing is a discontinued operation following the sale of Marston’s Beer Company into the joint
venture with Carlsberg UK, which completed on 30 October 2020.
Group Services
• Our central teams provide a range of functional services that support and connect the business, including IT, HR, Finance, Health and Safety and
Governance. All are focused on setting the financial and governance framework that helps to deliver our strategic objectives.
Marston’s PLC Annual Report and Accounts 2020
5
Marston’s Estate in 2019/20
/
We operate across the UK, with the majority of our pubs and bars located
in suburban areas.
21
250
1
In a city centre location
Scotland
North of
England
Midlands
Wales
South of
England
375
225
1
4
13
In city centre locations
630
494
2
3
6
In city centre locations
235
537
3
5
7
In city centre locations
104
159
Key
Pubs and Bars
Rooms
Brewing*
Distribution centres and depots*
* Since the period end, the Brewing assets, including distribution centres and depots, have transferred to the joint venture with Carlsberg UK.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
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Our Business Model
We are focused on operating a high-quality pub 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 remain 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.
Purpose
To build relationships and bring people
together, creating happy, memorable
and meaningful experiences.
Culture
Marston’s is a people-powered business and
there is one element at its core that never fades,
regardless of how big our business has become,
and that is we care. Our ‘reason for being’ as
a business is to help people feel good,
whether they are…
• drinking our beer
• eating our food
• experiencing our hospitality
• staying in our accommodation
• working with us or for us
• investing with us
If we are to achieve this, it is important that we run
our business in an ethical and responsible manner,
truly caring for the people and places we impact
along the way.
Resources and relationships
Our business relies on the strength of its people
and their relationships with our key stakeholders to
maximise the value from our portfolio and manage
our financial capital prudently.
Values
The Marston’s Way
As a business that prides itself on engaging and
enabling team members to take responsibility, it
is important that we all know what is expected
of us and that we have the support and guidance
to make the right decisions.
We are one Marston’s, one team – trusted to make
the right decisions and play our part.
We care – we take time to listen, understand and do
the right things for our customers and stakeholders.
We celebrate – when we do something really well,
we shout about it and have fun celebrating.
People
Resources and relationships
See pages 30 41
for more information
–
We dream big – together we strive to make Marston’s
so much more, always aiming to exceed expectations.
Marston’s PLC Annual Report and Accounts 2020
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Success
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.
• 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
Outcomes
We invest in our people and
their future to unlock their
potential and provide a
stimulating and fun workplace.
High-quality service and
offers and a consistently great
experience will encourage
repeat visits, increased
spend per head and a
recommendation to others.
A high-quality, well-maintained
pub estate will maximise its
value and be a more attractive
environment for our guests
to enjoy.
Engaged teams and happy
guests are key to delivering
our financial strategy. We aim
to drive shareholder value
through sustainable growth
and a disciplined approach
to expenditure.
Working closely with our
partners and suppliers to
establish mutually beneficial
long-term relationships will help
grow their businesses.
Proposition
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.
• Family
• Community
• Premium
• Rooms
Model
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.
• Managed – ‘Work for us’
• Franchised – ‘Work with us’
• Leased – ‘Partner with us’
Marston’s PLC Annual Report and Accounts 2020Strategic Report
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Chairman’s Statement
“I pay tribute to all our teams for their
patience and dedication in implementing
the ever--changing trading restrictions
with a positive attitude to deliver
fantastic Marston’s hospitality in such
difficult circumstances.”
William Rucker
Chairman
The uncertainties arising from COVID-19 and current Government restrictions
have led us to take a very cautious view of the carrying value of property
and goodwill on the balance sheet. The resulting £461million write down is
reflected in the balance sheet at the period end, though it should be noted
that this was partially offset by an estimated initial £280 million gain on the
disposal of Marston’s Beer Company into the joint venture with Carlsberg
UK in October, after the period end.
The joint venture with Carlsberg UK is an historic moment for Marston’s.
I wish our brewing colleagues every success in the future, and thank Richard
Westwood, Managing Director of Marston’s Beer Company, for his
vision and leadership over many years. The transaction valued Marston’s
Beer Company at £580 million and brought financial security through the
equalisation payment of up to £273 million, of which £233 million was
received in October. For the first time in our history we are a focused pub
operator, but our 40% shareholding in the £780 million joint venture will
allow us to benefit from substantial synergies and, we believe, the attractive
opportunities available to the Carlsberg Marston’s Brewing Company.
This has been a very difficult year. We want nothing more than to get back
to running pubs without restrictions, many of which are an anathema to the
social nature of pubs, and I believe that people have greatly missed the
contribution that pubs make to communities and to the social fabric of the
country. Our experience after reopening pubs following the first lockdown in
July demonstrated the enduring appeal of pubs and gives us confidence for
the future.
Looking forward, the rollout of a vaccine will be critical to removing the
restrictions over our business, which is essential to returning to normal levels
of trading, which we hope will be by the second half of 2021.
The immediate outlook nevertheless remains challenging and it is clear that
further Government support is needed for the hospitality sector to bridge the
period until ‘business as usual’ can resume. In a ‘normal’ year, Marston’s
would expect to raise over £500 million in taxes for the Government; it is
important to return to more normal trading, but it is also very important for the
Government’s finances.
As signalled in May, the Board does not recommend a dividend in respect
of the 2020 financial period.
In the longer term, we believe that our high-quality pub estate, which is
mainly freehold and in suburban locations, is well positioned as the market
recovers. We will continue to target debt reduction from operational cash
flow, with a target to reduce it to below £1 billion by the end of 2024.
William Rucker
Chairman
10 December 2020
Dear Shareholder,
All of us have been affected by the COVID-19 crisis. The closure of our pubs
from 21 March for three months, and the subsequent restrictions placed upon
our ability to trade, has had a profound effect on our business. Marston’s has
traded for nearly 200 years in one form or another, and this is the first time in
our history that our pubs have been unilaterally closed by law.
I am hugely grateful to all those who work at Marston’s, and to those who
have pulled together to help us through the crisis – not just to survive it, but to
ensure that the business is in a significantly stronger position today than it was
in March, which is a remarkable achievement.
During the period of closure, our focus was on supporting our people
at a time of great uncertainty, ensuring that our financial position was
robust, delivering the joint venture between Marston’s Beer Company
and Carlsberg UK, and planning for the reopening of our pubs on 4 July.
I believe we met those objectives and met them well. Our brewing and
supply chain teams deserve great credit for working tirelessly throughout
lockdown, to keep supermarket shelves stocked with Marston’s beers up
and down the country, with very high levels of service achieved.
On reopening on 4 July, we prioritised the safety and wellbeing of
our guests and our people; the retention of as much pub ambience
as possible given the onerous trading restrictions placed upon us; and
operating on a financially sustainable basis. Guest feedback, the very
low incidence of COVID-19 reported by guests or employees, and our
trading outperformance compared to the wider pub sector, indicate that we
were successful in managing these priorities. I pay tribute to our pub teams
for their patience and dedication in implementing, and adhering to, the
ever-changing trading restrictions with a positive attitude to deliver fantastic
Marston’s hospitality in such difficult circumstances.
We have balanced the needs of our stakeholders, including our people,
tenants and lessees, retailers, providers of finance (banks and bondholders),
communities, suppliers, and customers. Scarce resources have had to be
shared – though our support for Wolverhampton City Council in helping
to distribute food to people who needed it during the lockdown shows that
a huge impact can be made at low cost, and our distribution team did a
fantastic job with great enthusiasm.
Despite these enormous challenges, our cash flow was strong.
The c.£50 million reduction in net debt compared with the previous year –
even before the receipt of £233 million on completing the joint venture with
Carlsberg in October – was the result of very tight control of cash, together
with disposals in the first half-year. The support of the UK Government
through reduced VAT, the business rates holiday, and the furlough scheme
has been essential in maintaining liquidity and many jobs across the sector.
Following the completion of the joint venture, net debt has reduced further,
and we now have significant headroom against bank facilities.
Marston’s PLC Annual Report and Accounts 2020
9
Stakeholder Engagement:
How we have engaged during COVID-19
-
We will only succeed in running a successful and sustainable business, for the long-term benefit of our members
as a whole, if we behave responsibly, have positive meaningful relationships with all our stakeholders and uphold
high standards of business conduct.
This is how we have always done business but, this year, when the COVID-19 pandemic took hold of the UK and we were forced to close our pubs for
15 weeks, we were still able to demonstrate our approach. We focused on the safety of our people, the stability of our partners and suppliers, and the
financial security of the business. The Board met several times over the period to specifically consider these particular matters and the long-term consequences
of their decisions.
We established a Coronavirus Task Force comprising key representatives from across the business to enable a quick exchange of information to support our
actions; our people, our partners and our other key stakeholders were considered, communicated with and kept informed throughout the period. Our beer
business continued to brew and supply its products to those customers who remained open. As pubs reopened from 4 July, the Task Force evolved to focus
on delivering a great experience to our pub guests in a safe environment.
Throughout this report we have set out, in a series of case studies, how we have engaged with our stakeholders and responded to the impact of 15 weeks
of forced pub closure during the first COVID-19 lockdown, on the business.
Our People
We are a business where working together, caring about each other,
recognising a job well done and striving to be the best is what defines
us. The welfare of our people is paramount to us and we had to
make important choices when deciding that over 93% of our people
should be furloughed. We wanted to ensure that we stayed in touch
with all of our colleagues throughout lockdown and that they still felt
part of Marston’s whether they continued to work or not. Our Group
Communications Manager, in conjunction with our Head of Health
and Safety, co-ordinated answers to questions raised and issued
regular briefings on what was happening, as and when Government
guidance changed, and to provide some motivational support and
training to those who found themselves with time on their hands.
Shortly after we reopened our pubs, we surveyed our teams to see
how they were feeling about returning to work and the changes to
running our pubs.
See pages 31–32 for more information
Our Partners (retailers, tenants and lessees)
During lockdown, we worked with our partners to provide support
and rent concessions. We quickly communicated that, following the
closure of pubs, we would suspend all rent until they were able to
reopen and that we would credit all unopened draft stock in the cellar.
We encouraged all partners to have open conversations with us on
rent concessions and sought to work with them to agree a fair and
transparent arrangement tailored to each individual partner. Those rent
concessions continued after reopening with tapered discounts to help
our partners get back up and running.
Our Guests and Customers
Guest satisfaction is key to our success; by listening to their feedback and
engaging with them we aim to deliver a consistently great experience.
We want our pub guests to feel safe, welcome and have a great
experience each and every time they visit us. During lockdown, we stayed
in touch with those on our databases, sending them regular updates and
links to our virtual pub site The Armchair Arms where visitors could ‘meet
the brewer’ and partake in weekly interactive quizzes. We spent the time
reviewing our food and drink ranges and offers and worked to create a
safe environment on reopening. This culminated in a comprehensive guest-
focused manual that covers all aspects of pub safety and our guest journey
to ensure nothing was overlooked as we planned and prepared to reopen.
For the beer business, we saw immense demand for bottled and
canned products from our customers that continued to trade. The teams
working in brewing and logistics showed incredible dedication
and commitment to meeting the demand from our customers without
compromising on quality and service.
See pages 33–34 for more information
Our Communities
Our pubs and breweries are more than just a physical presence in the
communities where they are located; they are part of each community
and our pubs are where people within that community can come
together. We care deeply about this special relationship and actively
engage within our communities to support and promote local activities.
During lockdown our logistics teams stepped in to help Wolverhampton
Council distribute food parcels to vulnerable people.
See pages 36–37 for more information
See pages 34–35 for more information
Our Investors
We seek to nurture long-term relationships with investors who support
our strategy and share our vision for delivering sustainable and profitable
growth over the longer term.
As the order from the Government came to close our pubs, both our
CFO and our Director of Treasury and Tax focused on preserving
our cash and ensuring we had sufficient facilities to safeguard the
business during this period of uncertainty. Working closely with our
banks, bondholders and other debt providers, we were able to agree
additional liquidity headroom and financial flexibility to meet our
obligations beyond the end of the financial year.
See page 41 for more information
Our Suppliers
We recognise the benefits of good business relationships with key
suppliers who share our values. Without them we would not be in
a position to offer our guests great places to eat, drink and stay.
We foster long-term relationships and manage them in a responsible
and mutually beneficial way. We have contacted our landlords of
properties we lease to propose deferment of rent obligations or
extended payment plans. We also worked with those suppliers who
rely on our business to provide what support we could during the
period of lockdown and pub closures.
See pages 37–38 for more information
Marston’s PLC Annual Report and Accounts 2020Strategic Report
10
Chief Executive’s Statement
“Following the transformational Beer
Company transaction, we have a
significantly strengthened balance sheet
and are well placed to recover from the
pandemic with significant synergy and
growth opportunities.”
Ralph Findlay
Chief Executive Officer
2020 has been an extraordinarily difficult year for the pub and wider
hospitality sector, which has been particularly hard hit by the pandemic.
I would like to thank the entire team at Marston’s for their loyalty, dedication
and hard work in such trying circumstances.
Managing COVID-19
In response to the temporary closure of pubs mandated by Government
in March, our focus was to minimise the level of cash burn within the
organisation. Actions included:
Whilst short-term uncertainty remains, we have taken swift action to
future-proof the business to withstand the challenges presented by the
pandemic and Marston’s has emerged a significantly stronger business,
with a substantially strengthened balance sheet and well placed to rebuild
trading momentum when restrictions are eased. The roll out of the vaccine is
clearly critical to that but, in the meantime, the sector continues to face major
challenges and Government support will need to continue in order for many
viable businesses to survive.
Looking forward, Marston’s has entered the current year fit for the future and
excited about the next chapter in the Group’s development as a focused pub
and accommodation operator. We look forward to realising the potential
of the Group’s brewing joint venture with Carlsberg and wish the team at
CMBC every success. There is clear evidence that consumer demand for
our pubs remains strong and our geography, as a predominantly community
pub operator with 90% of our well invested, high quality pubs located
outside city centres, leaves Marston’s well placed to leverage the market
opportunities available to us over the medium to longer term.
2020 Performance Overview
The 2020 results were significantly impacted by the COVID-19 pandemic in
March 2020, including a 15-week period of enforced closure and
various subsequent trading restrictions in place since reopening. During the
period of closure, our focus was on supporting our people at a time of great
uncertainty, ensuring that our financial position was robust, delivering the joint
venture between Marston’s Beer Company and Carlsberg and planning for
the reopening of our pubs on 4 July.
Following the transformational Beer Company transaction described
on the opposite page, which completed on 30 October 2020, we have
a significantly strengthened balance sheet, a high-quality freehold pub
estate well placed to recover from the impact of the pandemic, and a 40%
investment in the Carlsberg Marston’s Brewing Company with significant
synergy and growth opportunities. Following the disposal of the Beer
Company, we now have a clear, simplified and focused pub strategy
underpinned by three core pillars: Guest Obsessed, We Raise the Bar and
We will Grow, described in more detail on pages 13–15. Our financial
strategy continues to be focused on debt reduction, with a revised target
of net borrowings (excluding lease obligations) to be below £1 billion by
financial year 2024.
Further details of our underlying and statutory earnings for the period are set
out in the Group Operating and Financial Review on pages18–20.
• Reducing all expenditure, including capital spend, to essential spend only
• Taking advantage of the Government furlough scheme with 93% of
employees being furloughed and the remaining employees taking a 20%
reduction in salary
• Securing covenant amendments and waivers in our bank and
securitisation facilities
• Accessing Government grants and relief, including supporting our tenants
by assisting them to claim the relief
• Maintaining a mental wellbeing programme to support
affected employees
In addition, and as previously announced, given the ongoing uncertainty
surrounding COVID-19 no dividends will be paid in respect of financial
year 2020.
Most importantly, we would like to thank our teams for their perseverance
through this challenging time. Through their fantastic efforts, we reopened
in July and went the extra mile in providing our guests with great
experiences whilst ensuring we complied with Government guidelines.
As a consequence, we outperformed the market in the final 13 weeks of the
period and this is all down to them.
Cash Flow, Financing and Balance Sheet
Despite the trading challenges described in this report, prudent cash
management resulted in a net cash inflow for the period of £51 million,
a £61 million improvement on 2019. In comparison with 2019, cash flow
benefited from reduced capital investment (including the cessation of
new-build investment in 2019), disposal proceeds from the sale of a number
of pubs and the suspension of dividends in 2020.
Following the enforced closure of pubs, we were successful in reaching
agreement with our bank syndicate and bondholders to make appropriate
covenant amendments in respect of certain financial covenants, and to
provide waivers where necessary. These included strong support from
bondholders for covenant waivers and amendments to April 2021 and the
adoption of liquidity and profit covenants with banks and private placement
providers to July 2021. This collaborative approach was helped by open
and constructive dialogue in a period of great uncertainty and underlines the
importance of good, long-term relationships with all our stakeholders.
Marston’s PLC Annual Report and Accounts 2020
11
We have secure medium-term financing in place, with a £360 million bank
facility and a £40 million private placement, both in place until 2024.
We also have secure long-term financing in place via the securitisation
liquidity facility.
In summary, we have significant headroom in our bank facility to provide
operational liquidity, and a securitisation liquidity facility to protect
bondholder payments for at least 18 months should that be required in
the event of further interruptions to trading. Our cash preservation actions,
described in the Group Operating and Financial Review, together with the
Government financial support on VAT and Business Rates, mean our ongoing
weekly cash burn in a full closure scenario (not the part closedown we are in
at the time of writing) is estimated to be around £3–4 million per week.
Inevitably, in the event of additional restrictions in the coming months, it is
possible that further covenant amendments may be required depending on
the nature of any restrictions introduced, and their duration. Whilst there is no
certainty that these amendments will be granted (this has been disclosed as
a material uncertainty in the financial statements), given our experiences to
date we are confident of securing these where necessary.
Further details are set out in the Group Operating and Financial Review on
pages 18–20.
Financial capital
We have a mix of predominantly long-term debt and equity with no
requirements for medium-term financing.
How this supports value creation
• c.90% freehold estate provides attractive security for funding
providers at competitive rates
• Flexibility to invest in assets to maximise long-term returns
• Joint venture transaction reduces debt and enhances net asset value
Securitisation
Sale & leaseback
Bank & Cash
Net Debt (pre IFRS16)
727
745
337
336
265
296
Lease liabilities
304
22
Net Debt (post IFRS16)
FY20
FY19
1,329
1,377
1,633
1,399
On completion, the Group would realise up to £273 million in the form
of a cash equalisation payment, which is subject to adjustment in respect
of: (i) customary working capital and debt/cash adjustments, and (ii)
£5 million of other adjustments. Of the up to £273 million equalisation
payment, £34 million is deferred for 12 months from completion with the
amount payable contingent on the extent of the recovery of the share price
performance of a pre-agreed basket of companies to pre-COVID-19 levels.
The transaction completed on 30 October 2020 with initial proceeds of
£233 million received on completion.
The cash proceeds have provided Marston’s with significant liquidity to
materially reduce debt in line with our stated strategy, whilst at the same time
retaining a significant stake in the joint venture and being able to benefit from
significant synergy and growth opportunities.
Outlook
Following the recent Government announcements on the Tier system and
criteria, the winter months will be both challenging and uncertain and 780
pubs remain closed after the November lockdown.
Our experiences from the Spring helped us to swiftly and efficiently respond
to the constantly moving restrictions imposed since the year end, with pub
teams furloughed where appropriate, and the cessation of all non-essential
spend. In addition, we have been able to minimise the extent of stock losses
given the slightly longer notice period.
During the period of closure, our focus is on the future. Following the disposal
of the Beer Company into the joint venture with Carlsberg, we are singularly
focused on operating a great pub business. As described in the strategy
section on pages 13–15, the initial lockdown provided an opportunity
to review all parts of our business, from improving commercial efficiency
through to development of technology. In this current period of shutdown,
this gives us an opportunity to further develop and evolve those plans,
ensuring we are well placed to take advantage of the significant trading
opportunity that will emerge as restrictions are eased.
Looking forward, the outlook does look more positive. The Prime Minister
has strongly intimated that restrictions will ease in the Spring and there is
increasing confidence that an effective vaccination programme can be
implemented. Our c.90% freehold pub estate is predominately located
outside of the challenged city centres and our experiences of trading since
4 July demonstrate that consumer demand is strong – our guests want to
go out and socialise and we are confident they will do so as soon as they
are permitted. Importantly, with the development of the vaccine, the more
vulnerable groups, who are a key part of our business, should have more
confidence in returning to pubs.
Finally, and most importantly, we have an incredible team at Marston’s.
We have worked hard to protect as far as possible the livelihoods and
wellbeing of our team members and our tenanted, leased and other
partners. Our focus on ‘doing the right thing’ for our people will pay
dividends – we have a loyal, hardworking group of people eager to
welcome our guests back into our pubs and again provide them with
great experiences.
Joint Venture with Carlsberg UK
On 22 May 2020, the Group announced that it had entered into an
agreement to contribute its brewing business, valued at up to £580 million
on a debt free/cash free basis, to a new UK brewing joint venture with
Carlsberg, the Carlsberg Marston’s Brewing Company, in return for 40% of
the equity in the joint venture. Under the agreement, Carlsberg would also
contribute its UK brewing assets, valued at £200 million on a debt free/
cash free basis, in return for 60% of the equity in the joint venture.
Ralph Findlay
Chief Executive Officer
Marston’s PLC Annual Report and Accounts 2020Strategic Report
12
Our Market Environment
Since reopening in July 2020, our priorities have been the safety of our guests and
employees, retaining ambience and high levels of service, and being financially
sustainable. How behaviours change as the market ‘normalises’ remains to be seen,
but we expect that the trends below are likely to continue for the foreseeable future.
Marston’s pub estate is well positioned to take advantage of these trends over time.
Whatever the future holds, our marketplace will remain a competitive one which, together with the impacts of
COVID-19, presents both challenges and long-term opportunities. Our market and consumer insight team inform
and support our strategic and investment decisions.
Celebrating and socialising outside the home matters more
During the lockdown, there was uncertainty about how and to what extent
people would resume ‘old habits’ when pubs reopened. Following the
15-week closure period, consumer confidence increased steadily throughout
July, August and into September in both the drinking-out and eating-out
markets. Community pubs performed particularly strongly. There is no
question that demand remains strong as demonstrated by the performance
of our pubs during the Eat Out to Help Out campaign in August.
Opportunities and response
• Utilise the in pub draught experience and sense of shared moments
and community, which cannot be recreated at home.
• Revise our pricing to ensure that guests have the appropriate value
incentive for their choices.
• Broaden the food offer to provide choices for more informal snacking
and grazing occasions.
Convenience and functional reasons to visit matter less
These are still important, but lockdown introduced home delivery from
supermarkets and restaurants on a much greater scale than had previously
been the case. Convenience dining at home has never been easier: at the
same time, when people do visit pubs, there is a much higher expectation
that the experience will make the effort worthwhile.
Opportunities and response
• Our menus have been simplified to enable our teams to focus on
delivering our bestselling dishes more quickly and consistently.
• Offer guests the opportunity to make healthier choices in food and
drink without sacrificing experience and quality; our menus feature a
range of healthy options including vegan and vegetarian dishes.
• All new product development delivers against the Government’s salt
and sugar reduction targets.
• Take advantage of the revival in the domestic tourist market by raising
awareness of our Inns.
Value for experience is replacing price discounting as the
motivation to visit pubs
The eating-out sector has been impacted by extensive and severe price
discounting in recent years. COVID-19 related capacity constraints to
comply with social distancing requirements have been a catalyst for
an increased focus on improved customer experience. Better quality in
food and drink, and improved service, are facilitating a move away from
unsustainable price promotion towards more premium offers.
Opportunities and response
• Working closely with suppliers to deliver the best possible products
that appeal to a wide range of tastes and restrictive diets at prices our
guests are happy to pay.
• ‘Low and No without the FOMO’ campaign introduced new low
alcohol, low calorie and low sugar drinks to ensure no-one is
excluded from a great in-pub visit.
• Range rationalisation across our pubs to reduce duplication and
complexity has freed up time and space for innovation.
• Provide guests with an increased breadth of drinks to enable them to
upgrade, whilst reducing the complexity for our people to enable them
to deliver quality services.
On-trade supply in the eating-out market is falling
In recent years capacity has expanded through an increase in casual dining
brands and restaurants despite the fact that demand in the eating-out market has
been relatively subdued. In recent months, supply has contracted significantly,
with financial distress illustrated by high profile administrations and insolvencies,
and we would expect this trend to continue over the remainder of the year.
Reduced supply is likely to benefit existing operators, and home delivery.
Opportunities and response
• Make sure our local pub is the best place in the area; well-maintained
with a great ambience provided by an engaged team.
• Focus on our guests’ satisfaction through improved food quality,
presentation and speed of service.
• Have a range of menu items that our guests can order to take away.
Suburban pubs benefit from increased homeworking
Lockdown has created a shift towards homeworking and the rapid growth in
new video conferencing applications. The extent to which this remains in the
future is not clear but both businesses and employees see at least some benefits
in retaining more flexible working patterns. Our pub estate is primarily suburban,
with relatively few city centre locations, and is well placed to exploit this trend.
Opportunities and response
• Take advantage of our pubs being at the heart of the community.
• Offer a working space away from home.
• Drive our range of quality and local cask beer across our pubs and
drive local engagement with guests.
• Use our pub footprint more actively to drive awareness and trial of our
Inns across the country.
Technology has become mainstream
Our desire to operate safely led to an acceleration in the implementation of
table ordering apps (and Track & Trace systems), at a pace that would not have
been thought possible prior to the pandemic. Not only have these systems been
implemented quickly, they have been positively embraced by guests.
Opportunities and response
• We have implemented a ‘click & collect’ menu across 150 of our
pubs and have also begun a trial with Deliveroo and Just Eat.
• Full presence on the biggest online travel agency sites with incentives,
including savings on food in pubs, when booking our Inns direct for
future visits to maximise the best of both worlds.
• Greater use of technology to engage with guests both pre- and post-
stay to improve the guest journey, including online check-ins and the
ability to order food and drink via their mobile device in room.
Marston’s PLC Annual Report and Accounts 2020
Our Strategy
13
Our strategic focus for much of the year has been on the immediate response to the
challenges presented by the COVID-19 crisis.
Our Strategy during 2019/20
/
1
Operating a high-quality pub 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.
• Maintaining a balanced pub portfolio across all segments
of the market.
• Continue to exploit growth segments in the beer market.
• Sustainable long-term growth of a local, national and global
• Targeted capital investment to improve pub values and premiumise
portfolio of brands.
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.
• Delivering a complete customer experience solution.
• A world-class supply chain delivering the highest quality service
at optimal cost.
Our Strategy from 2020/21: ‘Guest at the Heart’
/
For the first time in the Group’s long history, we have become a focused pub operator. We have revisited our
operational strategy and will develop our culture to place ‘Guests at the heart of everything we do’.
1
Being Guest Obsessed
2
We Raise the Bar
3
We will Grow
• Our Ways of Working
• Guest satisfaction
• Engaged and enabled teams
• Value for experience
• Well-maintained property
• Operational excellence
• More from existing guests and
welcoming new guests
• More from our people
• More from simplification
• More from our capital investment
Marston’s PLC Annual Report and Accounts 2020Strategic Report
14
Our Strategy continued
1
Being Guest Obsessed
Ways of Working
Embedding a guest obsessed people strategy across the business and all
disciplines in a consistent manner as a single cultural message is central to
realising our vision. At the same time, we are seeking to simplify processes
and streamline structures across the business to support the delivery of that
guest obsessed culture.
To that end, from 1 October 2020, we centralised support structures
including marketing, procurement, finance and HR which had previously
supported our Destination, Taverns and Premium businesses, and brought
those businesses together under the single umbrella which is Marston’s Pubs.
Our PLC Executive team is now comprised of a group of people with long
service within Marston’s and the pub sector generally.
Marston’s Pubs has two Operations Directors who are responsible for food-
led and wet-led pubs respectively. The Premium business, which includes
Revere, has been consolidated within this structure. We have also created a
single Marketing and Commercial Director role for Marston’s Pubs. This role
is central to the development of guest insight and the strategic direction
for marketing, as well as procurement, menu development and food and
drink quality.
Guest Satisfaction
In seeking to ensure that our decisions are based on insight, guest
satisfaction and the evaluation and improvement of satisfaction scores over
time, is a key performance indicator. This year we have invested in new
feedback systems across our estate, and we are also implementing rigorous
management processes which will more clearly define how guest comments
are handled and resolved.
GUEST
GUEST is the acronym we use to articulate the key points of our guest
journey. A simple, effective and memorable tool for our pub teams
to use to ensure that we deliver a great guest experience each time
they visit.
GUEST training was delivered to our head office operational teams
at the beginning of the year, by holding a guest focused conference,
where we explored each element of the journey. Our Area Operations
Managers were given tools and refresher training for each element,
with the clear challenge that we must become guest obsessed at every
one of our pubs.
Due to the closure of pubs in March, GUEST training at pub level was
postponed until the Summer, and formed part of our pub reopening
plan in the month before we reopened our doors to our much-
missed guests.
We used the opportunity to not only deliver guest-obsessed training
to our team members, but also as a vehicle to train our team members
on the COVID-secure measures within the guest journey. We created
a 30-minute mandatory e-learning course that all of our pub team
members, senior team and General Managers had to complete before
they returned to work in a reopened pub. We have also created a
Hotel GUEST journey training module that was dedicated to our inns
and lodges team members, to replicate the same training.
These training modules have been completed by over 10,000
employees to date and will be regularly updated as required.
Marston’s PLC Annual Report and Accounts 2020
15
2
We Raise the Bar
3
We will Grow
Value for Experience
Focusing on ‘value for experience’ recognises that, as described earlier
under our Strategic Priorities, value is measured in a range of ways, and
experience is likely to be just as important as price when considering which
pub to go to. Those experiences can relate to celebration, socialising, teams,
community engagement, music, service – but they provide reasons to make
‘going out’ worthwhile and memorable.
Clearly, value for money remains very important, but higher quality food
and drink and investment in improved service and ambience are critical
in competing with the convenience of home delivery. The eating-out
sector has suffered from unsustainable price promotion in recent years,
partly due to overcapacity in casual dining, but recent trends indicate that
consumers are willing to pay more if the experience is good enough and
sufficiently differentiated.
In assessing our current position in relation to value for experience, we
are already strong in wet-led and community pubs, but need to make
further improvements in our food-led pubs. The input of the new Marketing
and Commercial team will be key to determining the next steps towards
improved food and drink quality in food-led pubs. Our objective is very
clear: to create a pub estate that is locally loved by our guests throughout
the country.
Property – clear investment strategy,
regular maintenance
Our property plans will ensure that each of our pubs and bars is maintained
to a high standard and retains a characterful pub ambience.
Operational Excellence
In 2019, and in the first half of this year, we made progress in improving
Guest Satisfaction scores, EHO ratings, and our own food hygiene scores.
This has been achieved by enhanced operational focus (including the
incorporation of these measures into bonus schemes) and the creation of four
new roles in the centre to assist in improving standards.
We have been encouraged that, since reopening in July, we have made
further improvements on all these measures and achieved very high scores
in relation to COVID-19 safety measures. This included achieving very high
compliance with Test & Trace requests in our food-led pubs.
The simplification of our management structure detailed under Ways of
Working on the previous page will, we believe, enable us to achieve better
and more consistent operating standards across the business, to align our
people around the guest obsessed culture, and further improve standards.
Raising the Bar
• Removing complexity from structures and product ranges
• Enabling teams and assigning accountability for where we fall short
• Developing and rewarding teams that deliver a great
guest experience
• Relentless pursuit of high standards and operational excellence
• Adopting a continuous listening culture for our people and our guests
The market backdrop described earlier in the report, highlights the significant
opportunities for organic growth in the medium term. As such we are instilling
into our organisation belief that growth is achievable, and that we will
invest in our people, pubs and offers to achieve it. There are four key areas
of focus:
More from: existing guests and welcoming new guests
As described earlier in the report, the market and social dynamics that have
emerged from the COVID-19 crisis present opportunities for our well-
positioned estate and (post creation of the joint venture with Carlsberg UK)
our refocused business to target increased frequency of guest visits and
increased ‘spend per head’.
More from: our people
We have made steady progress in developing our teams in the last couple
of years, which has involved both internal development and external
recruitment. However, in order to exploit future growth opportunities, we
will be more rigorous in developing our teams across the organisation,
including the coaching and development of senior management and in
succession planning.
More from: simplification
Simplification of the business is not just a measure to improve efficiency
and reduce costs. Through maintaining a philosophy of simplicity, we will
constantly challenge ourselves that we are doing fewer things but delivered
to an excellent standard, with the aim of driving higher guest satisfaction.
More from: capital investment
We have allocated modest levels of growth capex into our medium-term
plans, ensuring these funds are deployed to generate maximum return.
We have made it clear to our teams that consistent delivery of high return
on organic growth capex will ensure the allocation of additional spend in
future years.
Clearly, it is difficult to set out quantitative evidence of progress on the above
from our 2019/20 results, but we will update on progress on our pillars once
the sector has returned to more normalised levels of trade.
Growing
• Earning the right to grow margins
• Growing loyalty through personalised offers
• Attracting new guests through recommendations and offers
• Greater rigour in identifying high-returning capital expenditure
• Consistently measuring and assessing key financial metrics
Marston’s PLC Annual Report and Accounts 2020Strategic Report
16
Our Key Performance Indicators
Our KPIs represent the principal metrics that we focus on to run the business.
They align to our strategic objectives and help determine how we are remunerated.
Here we report the historic data for a combined pub and beer company during a period that was significantly
affected by the impact of COVID-19.
/
2019/20
Financial
Pubs and Bars
Beer business
Underlying earnings
per share (EPS) (p)
Like-for-like sales* vs CGA Peach
Tracker (%)
Total own ale – market share (%)
(1.7)
20
19
18
20
19
18
0.9
0.6
12.7
13.9
7.0
20
19
18
16.5
14.2
14.0
Net cash flow (NCF) (£m)
Critical role turnover (%)
World beers – market share
growth (%)
20
19
18
50.5
(10.5)
(61.2)
See page 20
for how this is calculated
20
19
18
20
19
18
19.3
32.9
28.3
20
19
18
2.1
2.5
2.6
52.6
64.7
72.2
General manager
Head chef
CROCCE* (%)
Happiness score
On time in full
(retail and logistics) (%)
20
19
18
6.4
10.4
10.3
In October 2019, we launched a new guest
satisfaction survey to accurately record guest
satisfaction at all our pubs.
See page 20
for how this is calculated
Pubs
73%
20
19
18
20
19
18
96.3
94.6
93.6
96.2
95.5
95.4
Retail
Primary
*See Glossary on page 149 for definition
Marston’s PLC Annual Report and Accounts 2020
17
Following the sale of the beer business, the Group has refined its strategic
objectives and principal metrics and will be reporting on those listed below
for 2020/21 onwards.
2020/21
/
Financial
Free cash flow
Debt reduction
Pub operations
Guest satisfaction
(Happiness score)
‘Locally loved’
Corporate
Employee engagement
As a consequence of COVID-19, we have been
unable to carry out our normal annual survey.
However, to ensure that we were listening to
how engaged and enabled our people were,
in its place we used a pulse survey tool to help
us understand the engagement and enablement
of our teams and, more importantly, listen
to employee feedback and learn from their
experience of working during the pandemic.
Our pub teams reported a score of over 85%
of those surveyed for being treated well or
extremely well by Marston’s during the pandemic
and lockdown periods. Over 84% of the
responses from our pub teams felt Marston’s
had responded well or extremely well to
the challenges presented and over 82% of
respondents felt that Marston’s were working as
one team throughout that time. We also surveyed
our head office teams following their return to
work. We achieved over a 64% response rate
where 95% of people confirmed they had been
able to connect with others and work effectively
whilst at home.
Our scores for the 2019 survey were strong,
68% engagement (63% benchmark) and
69% enablement (65% benchmark).
FTSE4Good ESG score
EHO score
20
19
18
3.3
2.7
2.5
Corporate
Employee engagement
FTSE4Good score
The cash generated from pub operations,
after paying interest and other borrowing
costs, that is available for re-investment,
reducing debt or paying dividends.
We are committed to reducing debt
and have revised our target to less than
£1 billion by financial year 2024.
We are obsessed with our guests’
happiness. We want their pub and inn visits
to be a great experience every time and
we frequently measure their satisfaction to
identify areas we can improve upon.
We have set ourselves a target of
improving our guests’ happiness score
by 5% next year.
We want to be the local choice for our
guests and for them to be our advocates
so we will measure this using external rating
data. Our overall average score was
4* at the end of the period and our target
is to increase this social media score by
0.2 next year.
The health and safety of our guests and our
own people is paramount and we expect
all of our pubs to operate to the highest
standards of compliance. Recognising that
some fall short, we will measure our progress
towards an overall score of 4.7.
Happy teams make happy guests and
we are committed to supporting and
developing our teams to do this. We will
continue to listen to and measure the
engagement and enablement of our teams.
We will continue to measure our
commitment to our environmental, social
and governance considerations using
this consolidated external metric of key
sustainability factors.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
18
Group Operating and Financial Review
“Our prudent cash management has
improved our debt position and we
intend to continue with our debt
reduction strategy.”
Andrew Andrea
Chief Financial and Corporate Development Officer
Group Performance
Group sales for the 53 weeks ending 3 October 2020 were £821 million,
30% below last year. Total Pubs and Bars sales for the year were
£516 million, 34% below last year, principally reflecting the 15-week
closure period and the impact of the disposal of 172 pubs for proceeds
of £61 million in the first half-year. In Brewing, sales for the year were
£306 million, 22% below last year. Off-trade volumes for the year were
up 23%, driven by exceptional demand during the period of pub closure.
On-trade volumes (excluding the closure period) were 11% below last year.
Overall, underlying trading prior to 16 March was solid, including strong
Christmas and New Year trading, despite the impact of the severe and
widespread flooding in November 2019, and again in February this year.
Like-for-like sales in pubs for the 24 weeks to 14 March were down 1%
and Beer Company earnings were in line with expectations. In the week
commencing 16 March, when the Government issued COVID-19 guidance
to the hospitality venues, unsurprisingly trading deteriorated sharply. All pubs
were subsequently closed in line with Government guidance on 20 March.
From 4 July to the period end, we had reopened approximately 99% of our
pubs, though a small number closed subsequently as revised regulations
were introduced in Scotland where we have 21 pubs. Managed and
franchised like-for-like sales averaged 90% of last year over the 13-week
period to 3 October. This represented outperformance of approximately 7%
relative to the UK pub sector (CGA Peach Tracker) over the 13-week period,
principally reflecting the benefits of our balanced pub estate of wet-led and
food-led pubs, which are predominantly suburban and community based,
with limited exposure to city centres and only three pubs in Central London.
The results for the period reflect the adoption of IFRS 16 ‘Leases’, details
of which are set out in note 11 of the accounts. In summary, as previously
announced, this change to the accounting rules has no impact on cash
flow but has increased the underlying loss before tax by £3.2 million and
increased reported total net borrowings, as described on page 19, to reflect
lease obligations not previously recognised as debt on the balance sheet.
The financial consequences of pub closures due to COVID-19, for the
duration of the 15-week period of enforced closure, subsequent restrictions
and local lockdowns in many areas across the country, are reflected
in significantly reduced profit. Underlying EBITDA was £125.6 million
(2019: £215.0 million), and total underlying operating profit was
£74.0 million (2019: £172.8 million). The total underlying loss before tax
was £22.0 million (2019: £95.1 million profit). The basic underlying loss per
share for the period was 1.7 pence per share (2019: 12.7 pence earnings
per share).
On a statutory basis, the total loss before tax was £397.1 million
(2019: £20.1 million), and the loss per share was 56.8 pence per share
(2019: 2.8 pence). The difference between underlying and statutory loss
before tax is £375.1 million of exceptional items, of which £338.0 million
were non-cash items, which are described in further detail on the
opposite page.
Pubs and Bars
Total revenue decreased by 34.3% to £515.5 million principally reflecting
the impact of COVID-19 as described earlier and the impact of the disposal
of 172 pubs. Total like-for-like sales were 3.6% behind last year.
Underlying operating profit was £84.7 million (2019: £167.5 million).
Reported underlying operating margin of 16.4% is below last year, reflecting
the weaker turnover.
Brewing
Total revenue decreased by 21.5% to £305.5 million. Underlying operating
profit was £17.3 million (2019: £32.6 million). Underlying operating
margin of 5.7% was below last year, again reflecting the impact of the
weaker turnover.
Pubs and Bars
Brewing
Group Services
Group
Revenue
Underlying
operating profit
Underlying
operating margin
2020
£m
515.5
305.5
–
821.0
2019
£m
784.2
389.3
–
1,173.5
2020
£m
84.7
17.3
(28.0)
74.0
2019
£m
167.5
32.6
(27.3)
172.8
2020
%
16.4
5.7
(3.4)
9.0
2019
%
21.4
8.4
(2.3)
14.7
Marston’s PLC Annual Report and Accounts 2020
19
Following the enforced closure of pubs, we were successful in reaching
agreement with our bank syndicate and bondholders to make appropriate
covenant amendments in respect of certain financial covenants, and to
provide waivers where necessary. These included strong support from
bondholders for covenant waivers and amendments to April 2021 and the
adoption of liquidity-based covenants (based on cash flow) with banks and
private placement providers to July 2021. This collaborative approach was
helped by open and constructive dialogue in a period of great uncertainty
and underlines the importance of good, long-term relationships with all
our stakeholders.
We have secure medium-term financing in place. At the period end we had
a £360 million bank facility available until 2024, of which £270 million
was drawn providing headroom of £90 million, significantly better than
our prudent forecasts. An additional £70 million facility agreed in May
2020 to provide further short-term liquidity remained undrawn and has now
been cancelled as it is not required. We also have a £40 million private
placement in place until 2024.
The joint venture between Carlsberg UK and Marston’s Beer Company
completed on 30 October 2020 and, on completion, we received initial
proceeds of £233 million, which were used to further reduce debt. The
£360 million bank facility has been reduced to £280 million, which remains
available until 2024.
We also have secure long-term financing in place. We utilised £15 million of
the securitisation liquidity facility to satisfy the July quarter-end principal and
interest payments. However, for the quarter to October 2020, we generated
sufficient funds from operations to make payments and to repay £5 million
of the liquidity facility, demonstrating that we are more than able to meet
securitised debt obligations despite the current trading restrictions being
in place.
In summary, we have significant headroom in our bank facility to provide
operational liquidity, and a securitisation liquidity facility to protect
bondholder payments for at least 18 months should that be required in
the event of further interruptions to trading. Our cash preservation actions
described overleaf, together with the Government financial support on VAT
and business rates, mean our ongoing weekly cash burn in a full closure
scenario (not the part closedown we are in at the time of writing) is estimated
to be around £3–4 million per week.
Inevitably, in the event of additional restrictions in the coming months it is
possible that further covenant amendments may be required depending on
the nature of any restrictions introduced, and their duration. Whilst there is no
certainty that these amendments will be granted (this has been disclosed as
a material uncertainty in the financial statements), given our experiences to
date we are confident of securing these where necessary.
Furthermore, the COVID-19 situation has triggered impairment reviews of
goodwill, property, plant and equipment and right-of-use assets. The total
value of these impairments, as described in the notes to the accounts is
£461 million. Clearly this has distorted the net asset value of the Group in the
short term at the balance sheet date. However, a degree of this is purely as a
result of timing as this will be significantly offset in 2021 by the positive impact
of the completion of the joint venture with Carlsberg, reflecting the cash
received from the disposal of the Beer business into the joint venture and the
carrying value of the Group’s share of the joint venture moving forwards.
The profit on disposal is estimated to be around £280 million and the spot
value of the contingent payment on 4 December was around £20 million,
which will increase net asset value per share by approximately 48 pence in
the 2020/21 financial year.
Taxation
The total underlying rate of taxation of 52.3% in 2020 (2019: 15.7%) is
above the standard rate of corporation tax. This means that the tax credit
is higher than expected due to a prior year adjustment to deferred tax in
respect of the net book value of assets qualifying for capital allowances.
Total tax contribution
£384.6m
Duty
VAT
Employee payroll taxes
Business rates
Employer payroll taxes
Corporation tax
Other
Total
£201.5m
£112.1m
£34m
£16.4m
£16.3m
£1.7m
£2.6m
£384.6m
Non-underlying Items
There is a net non-underlying charge of £349.1 million after tax, of which
£324.7 million relates to continuing operations and £24.4 million relates to
discontinued operations.
The charge in respect of continuing operations primarily relates to the
goodwill impairment of £200.6 million and the impairment review of the
pub estate in the period, which resulted in a £105.1 million charge to the
income statement.
There is also a £22.4 million loss on disposal and associated costs from
portfolio disposals of smaller wet-led leased, tenanted and franchised pubs
and associated properties, and £18.5 million of associated costs/charges
from COVID-19, principally comprising bad debt provisions, stock write-offs
and financing costs.
In addition, there are net credits of £4.2 million in respect of VAT claims, a
charge of £0.9 million from the write-off of acquisition and development
costs, a charge of £0.6 million in respect of the net interest on the net defined
benefit pension asset/liability and a £6.4 million net loss in respect of
interest rate swap movements. There is a credit of £23.8 million relating to
the tax on non-underlying items and a credit of £1.8 million in relation to the
change in corporation tax rate.
The charge in respect of discontinued operations relates to the impact of
COVID-19, disposal costs and the impairment of central assets associated
with discontinued operations.
Capital Expenditure and Disposals
Capital expenditure was £63.7 million in the year (2019: £133.8 million).
We expect that capital expenditure will be around £40–45 million in 2021.
Cash Flow, Financing and Balance Sheet
Despite the trading challenges described earlier in the report, prudent cash
management resulted in a net cash inflow for the period of £51 million,
a £61 million improvement on 2019. In comparison with 2019, cash flow
benefited from reduced capital investment (including the cessation of new-
build investment in 2019), £75 million of disposal proceeds from the sale
of 172 pubs and the suspension of dividends in 2019/20. Operating cash
flow of £157 million reflected lower earnings, partially offset by improved
working capital including the agreed deferral of duty and VAT payments
to HMRC.
Net borrowings, excluding IFRS 16 lease commitments was £1,329 million
(2019: £1,377 million), with the decrease driven by the cash actions
described above. Total net debt of £1,633 million includes lease obligations
of £304 million following the adoption of IFRS 16.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
20
Group Operating and Financial Review continued
Financial Strategy
In 2019 we set out a target to reduce net borrowings to below £1.2 billion.
Following the completion of the joint venture between Carlsberg UK and
Marston’s Beer Company, and the corresponding receipt of £233 million in
October 2020, our borrowings are significantly reduced.
Our debt structure is mainly long-term, secured on our high-quality 91%
freehold estate, with interest rate exposure hedged using interest rate swaps.
• Tight control of capital expenditure of £40–45 million per annum
including £10 million of growth capital.
• Disposal of non-core assets of around £10 million per annum.
• Reduced interest payments as a result of lower borrowings.
• Lower levels of dividend payment reflecting the dividend considerations
described below.
• Receipt of dividends from the Carlsberg Marston’s Brewing Company.
We have further reviewed our financial strategy and have concluded that
our aim to reduce debt should continue and we have set a revised target
to reduce net debt before IFRS 16 lease obligations to below £1 billion by
financial year 2024.
This target is expected to be achieved through:
As part of our response to the COVID-19 crisis we suspended dividend
payments and a decision has not yet been made regarding the timing of
reinstatement of dividends. Our dividend policy moving forwards will be
based on cash cover, rather than on historical earnings cover, and it is likely
that any dividends paid should be covered by underlying cash flow after
principal repayments of securitised bonds.
• Cash from operations, including the benefit of c.£5 million per annum of
overhead savings to be implemented in 2021.
• A more focused approach to capital allocation, targeting enhanced
returns on the existing estate. This includes the suspension of new openings
for the foreseeable future.
Andrew Andrea
Chief Financial and Corporate Development Officer
CROCCE
Non-current assets:
Goodwill
Other intangible assets
Property, plant and equipment
Other non-current assets
Current assets:
Inventories
Trade and other receivables
Assets held for sale
Liabilities:
Liabilities held for sale
Creditors*
Cash capital employed
EBITDA
CROCCE
Free cash flow
Net cash inflow from operating activities
Interest received
Interest paid
Free cash flow
Net cash flow
Increase in cash and cash equivalents in the period
Cash outflow from movement in debt
Net cash flow
* Creditors comprise trade and other payables, other non-current liabilities and provisions for other liabilities and charges.
Balance
£m
Depreciation
£m
Revaluation
£m
–
32.5
2,038.3
17.5
10.4
16.2
349.7
(111.0)
(234.8)
2,118.8
9.1
258.1
(430.6)
267.2
(430.6)
2020
Adjusted
£m
–
41.6
1,865.8
17.5
10.4
16.2
349.7
(111.0)
(234.8)
1,955.4
125.6
6.4%
2020
£m
156.5
1.5
(91.0)
67.0
2020
£m
3.1
47.4
50.5
Marston’s PLC Annual Report and Accounts 2020
Risk and Risk Management
Managing Risk during an Exceptional Year
The management of Marston’s during the pandemic has required a robust
response from all areas of the business. As events and Government policy
have progressed the business has had to respond quickly to protect its
people and guests, secure its pubs, safeguard liquidity and control costs.
The pandemic continues to bring significant uncertainty to the operation of
our business. Since reopening sites, our business has proved to guests that
we can operate in a COVID-19 safe manner that does not diminish the
enjoyment of visiting the pub.
By operating safely, we have demonstrated to Government that its
COVID-19 guidelines and regulations can be effectively deployed at our
premises. There is currently no proof that shutting pubs or reducing trading
hours reduces the rate of transmission, in fact many argue that it leads
to more social mixing within the home, in conditions more conducive to
infection. Further lockdowns and restrictions on trade however are possible
and Government have indicated this could reach into 2021.
Throughout the year Marston’s has demonstrated sound control in the
face of COVID-19, seizing the opportunities that the changing operating
environment has afforded. Our central support teams have been able to
work effectively at home. Our IT technology, already well prepared for
agile working, has coped without any major issues and our pub teams have
trained and adapted quickly to new ways of working.
The Board and Audit Committee continue to recognise the importance of
sound risk management to achieving all our strategic objectives. Keeping risk
management integral to the operation of the Group is a priority, requiring a
continuous scan of all threats and opportunities.
The trading environment in which our business operates has changed as a
result of the pandemic and is likely to continue to adapt to the needs of our
guests and new opportunities. External factors will always change the risks
faced by our business, many of which, such as COVID-19, are unavoidable
and must be robustly mitigated if our strategic objectives are to be met.
Our risk management processes aim to anticipate 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 rightly have a high expectation of
our ability to maintain the safety and quality of our 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.
We build resilience into our supply chain while recognising the commercial
importance of taking risks within an acceptable tolerance. We invest in our
IT network to ensure there is enough 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.
Our code of conduct, The Marston’s Way, is aligned with our corporate
policies to articulate what the business expects of our employees.
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.
21
Principal risks
The risks are plotted on the matrix according to impact and likelihood.
The placing of the risk reflects the position after the mitigation controls.
1. Pandemic
2. Liquidity
3. Health and safety
4. Food safety
5. Financial covenants,
pension fund deficit
and accounting controls
t
c
a
p
m
I
6
6. Market/operational
7. Political and economic,
including Brexit
8. Information technology
3
4
7
1
2
8
5
Likelihood
Key
Increasing risk
Decreasing risk
Less movement
Current key risk drivers
A. Pandemic
COVID-19 currently dominates the spectrum impact of risk for the Group.
The pandemic has created a changed operating environment for our
pubs, and significant uncertainty regarding local and national lockdowns.
The rollout of the vaccine during the current financial year should allow
normal trading conditions to resume.
B. Liquidity
The disruption to trade and the consequential impact of COVID-19 on
profitability could affect the Group’s ability to gain additional financial
backing if the pandemic was to worsen and the pub estate was subject to
another national lockdown. During the first lockdown Marston’s achieved
an additional short-term bank facility by demonstrating that the impact of a
lockdown is temporary in nature and cannot harm the long-term prospects of
the Group.
C. Health and safety
The pandemic has increased the threat to public safety everywhere.
We recognise that the safety of guests and our people is critical to the
continuing operations of our sites. Throughout the crisis, while the breweries
continued to operate, and since reopening the pubs, Marston’s has proved
its ability to operate within the Government’s guidance and regulations.
D. Brexit
The UK and the EU may not reach a trade agreement by the end of 2020,
which could result in higher import costs for Marston’s suppliers. Marston’s
could mitigate the impact by seeking alternative products, possibly from
outside the EU.
If avoidance is impossible, Marston’s will seek to mitigate risk by investing
in effective controls or by sharing risks with a third party. These controls
are managed and monitored to give assurance that the risk level is in
accordance with the parameters set by the PLC Executive Committee.
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 people, guests, customers and the
public, by guarding against threats to health, hygiene and safety as an
absolute priority.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
22
Our Principal Risks and Uncertainties
The Board recognises the following principal risks could materially impact upon the
operation of the business and its strategic objectives.
Pandemic risk is recognised as an individual key risk below due to the uncertainty of
the current crisis, its duration of impact and its eventual resolution. It is one of the very
few risks which can result in the complete shutdown of our pub estate.
At present it is appropriate to recognise that future lockdowns at a local or national level remain possible.
Many of our principal risks are amplified by the pandemic crisis, necessitating additional mitigations to be put in place to
support future business continuity. The pandemic impact upon the individual principal risks is shown on the following pages.
Key
Increasing risk
Decreasing risk
Less movement
1. Pandemic
Risk context
COVID-19 uncertainty
regarding the continued
impact upon public
health and our behaviour.
The duration of measures
taken to reduce the infection
rate is uncertain.
The risk
There is a risk that infection
rates increase leading to
further restrictions on the
public and further trading
regulations for pubs
and lodges.
Potential impact
Ability of our teams to
operate safely.
Reduced numbers of guests,
and shorter stays.
Increased operating costs.
Mitigation
• Tracking government advice and implementing it effectively.
• Adapting our pubs to facilitate distancing.
• Training our team members.
• Building contingency plans for future lockdowns.
• Consulting with our employees on safety concerns and
operational issues.
• Simplifying our menus, streamlining our guest proposition
and our supply chain to concentrate on offering the highest
guest satisfaction at the right margin.
• Regular scrutiny of asset values.
Impact
The pandemic has impacted the valuation of the Group. Hospitality sector share prices are
depressed to a historic low. The determination of asset values must consider future trading
levels which are at present uncertain.
Movement – Increased: The world is in the midst of a global pandemic. Until a vaccine has been successfully deployed, our operating environment and
the ability to engage with our guests remains potentially disrupted.
Opportunity: Our pubs have been sorely missed by guests when forced to close, and upon reopening, their popularity especially during the EOHO
promotion has been a reminder of their importance to their community. The situation reinforces our guests’ loyalty to their local pub. Pubs can benefit from
the increased spend by the public within the locality of their homes. The changing marketplace provides opportunity for us to stand out to our guests.
The vaccination of the most vulnerable has begun in the UK, hopefully this will continue successfully, leading to widespread immunisation in 2021.
Marston’s PLC Annual Report and Accounts 2020
23
2. Liquidity
Risk context
Business strategy is to
reduce debt, however
short-term disruption could
necessitate the need for
additional finance.
Pandemic impact
The risk
While the UK battles the
pandemic, there is a risk
of regional lockdowns or
national measures which
could impact upon the
ability of the pubs to trade.
Potential impact
The liquidity of the business
could come under strain as
a result of steps taken by
the UK Government.
Successive waves of the
pandemic could impact
upon the confidence
of banks to back those
businesses most affected,
such as hospitality.
Mitigation
• Continue to lobby Government for pubs to remain open
with the assurance that they can operate in a COVID-19
safe manner.
• Lobby Government for more financial support.
• Reduce debt.
• Conserve liquid funds by cutting back on capex spend and
reducing costs.
• Maintain strong relationships with financial backers.
• Significant headroom in our bank facility to provide
operational liquidity for at least 18 months without
further recourse.
• Lobby Government on the importance of the pub trade to
the UK economy.
• Plan for resilience within our financial model to cover further
short-term disruption.
Movement – Increased: UK Government have taken action to help protect the hospitality business during the pandemic, which has helped liquidity
within Marston’s, however trading conditions are likely to remain disrupted in the short term.
Opportunity: In the medium term competition may reduce as a result of operators scaling back or leaving the market, bringing opportunities at the right
rate of return.
3. Health and safety
Risk context
The safety of our guests, our
people and the public is
fundamental to our activities.
We seek to attain the highest
levels of safety. Lapses of
safety damage the trust and
reputation of the Group.
Pandemic impact
The risk
Breaches of health and
safety regulations might
endanger the health of an
individual, attract media
attention and high 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.
Once issued, regulations have been communicated by our
Health and Safety team to our operational managers to
ensure they are clear about the steps they need to follow.
Pub teams have been retrained on new measures when
necessary. Our health and safety audits and our Regional
Safety Advisers have checked upon compliance at site level.
The Government and local
authorities have issued
instructions for hospitality
venues to operate safely
which have changed
depending upon the rate
of infection.
Movement – Increased: There is an increased responsibility for Marston’s to operate safely during the current pandemic.
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 our absolute commitment to guest
care, thereby building long-term trust.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
24
Our Principal Risks and Uncertainties continued
4. Food safety
Risk context
Our guests must be provided
with accurate and reliable
information on the food
ingredients within our
products. It is paramount
that we can guarantee this
and that we keep their trust.
Public concern over allergens
has grown in recent years
and attracts media coverage.
Pandemic impact
The risk
Breaches of food standards
regulations attract adverse
media attention and
high penalties.
The reliability of the
information given to our
team members, their
training, and their care to
engage with this matter
is key.
Our guests’ trust in our high
standards of food hygiene
could be quickly eroded by
individual incidents.
Potential impact
Increased regulation
directly affecting Marston’s,
or our suppliers, could
increase the complexity
of the information to be
provided and the cost
of compliance.
Mitigation
• Maintaining excellent levels of compliance through policies,
training and monitoring.
• The release of a new e-learning module on allergens for
completion by all pub team members.
• Working with our supply chain to maintain robust systems for
identifying constituent food ingredients.
• Due diligence on accepting new suppliers, monitoring
and tracking.
• 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.
Disruption to the food
supply chain resulting in
financial pressure on food
suppliers to the hospitality
industry. Wasted food
and drink trapped in sites
locked down.
• Since the first reopening of pubs we have reduced
our menus, with a higher focus upon the quality of our
food items.
• Limiting the number of food items also supports our
suppliers’ margins.
• Substitution of food items to avoid waste.
Movement – Decreased: The decrease in the number of menu items has brought greater focus upon the quality of food. Increased training on
allergens for our pub teams.
Opportunity: There is an opportunity for Marston’s reputation for food safety and the care of our guests to grow. In 2021 we will continue with the
development of a new food information system to collect more detail from our suppliers and enhance safety further.
5. Financial covenants, pension fund deficit, and accounting controls
Risk context
The Group’s financial system
handles many transactions
accurately and securely.
Accurate reporting is key
to running the business
effectively, and in compliance
with our financial covenants.
The Group’s assets are valued
on the basis of future profitability.
The pandemic increases
uncertainty and therefore
increases the risk that the
accounting valuation diverges
from market valuation.
Pandemic impact
The risk
Breach of the covenants
with our lenders.
Incorrect reporting
of financial results.
Unauthorised transactions.
The pension deficit will
increase while investment
yields fall.
Potential impact
Loss of investor confidence,
and reputational damage.
Breach of covenants,
resulting in additional
financial operating
restrictions.
Lockdowns and COVID-19
safety restrictions impact
upon the normal operation
of our pubs and lodges.
Covenants could be
impacted by a fall in profit.
Mitigation
• Regular detailed management accounts, budgets
and forecasts.
• Detailed financial data collected from our sites.
• Financial auditing of our sites based on data analysis.
• Constant monitoring of financial ratios.
• Internal and external audits.
• Segregation of duties.
• Access controls within our systems.
• Levels of authority.
• Commitment to reduce debt.
• Management of the pension’s investment portfolio to
spread risk.
• Communication and good relations with our bond
holders and financial lenders enabled agreement to
make appropriate covenant amendments and waivers
where necessary.
Movement – Increased: There are strong controls mitigating this risk to a low level. The pandemic has however reduced our profitability this year.
The impact on our covenants is reduced by clear communication and good long-term relationships with our lenders in order to effectively explain the
impact of the current trading conditions.
Opportunity: The collection of financial data from our sites continues to increase the knowledge of our guests’ spend. In recent years we have developed
our capability to analyse this data to a depth not previously possible. The use of the data improves the margins we achieve on food and drink. It also
means that offers to guests can be more focused, and marketing campaigns can be deployed more quickly across the pub estate.
Marston’s PLC Annual Report and Accounts 2020
25
Potential impact
Longer-term reduction
of sales as a result of
the pandemic, or losing
opportunities to increase
our value proposition.
The business will look to
reduce costs in reaction
to a sustained reduction
in sales.
Reduction in guest
satisfaction levels, and re-
visits to our pubs.
Increased costs as a result
of seeking alternative
suppliers in order to build
more resilience within our
supply chain.
Mitigation
• Continual assessment of guests preferences: market and
consumer insight data.
• Continual analysis of sales performance data of single sites
and by pub format.
• Pricing strategy built upon careful analysis at sufficient detail
of guests’ sensitivities.
• Marketing, including digital marketing campaigns.
• Costs reduced in response to any sustained loss of sales,
including menu margin analysis.
• Investment, location and design of our pubs.
• 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.
• Continual awareness of our people offer compared to our
competitors through participation in appropriate networks.
• Improved training, induction and development programmes.
• Surveying our employee engagement and identifying
action points for teams.
• Organised transition of processes into the new joint venture
with Carlsberg.
6. Market/operational
Risk context
Marston’s revenue is
dependent upon being
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.
Marston’s competes for high
calibre people to operate our
pubs. Our strategic objectives
are heavily reliant upon
the quality and training of
our people.
The risk
Our pubs, brands
or services fail to
attract guests, do
not reflect changing
guest preferences, or
offer poor service or
quality. Equally there
is a risk that our prices
become uncompetitive.
Failure to attract or
retain the best people
negatively impacting
pub performance.
Trading restrictions and
the impact on consumer
confidence as a result of
Uninterrupted operations are
dependent on the continual
supply of goods and services COVID-19 creates the
often from single sources.
The pandemic caused
additional operating costs
due to business disruption
such as stock write-offs and
bad debts.
risk of substantially lower
sales until a vaccine is
widely deployed.
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 operational performance
of our joint venture with
Carlsberg is materially
significant to our total profit.
Pandemic impact
Disruption to food supplies
from the EU, with or
without a trade agreement.
Increases in customs duties
could impact our offering to
guests and our cost base.
• Enhanced safety controls.
• Campaigns and promotions.
• Communicating with our guests, collecting feedback, acting
upon points of improvement and keeping their trust.
• Working with our suppliers to remove complexity.
Local and
national lockdowns.
Compliance with
evolving regulation.
Guest care.
Safety of our people.
Supporting our suppliers.
Movement – Lower likelihood: The threat from intense competition on price amongst hospitality companies has receded this year.
The operation of our pubs could be impacted upon by further or extended trading restrictions as a result of the pandemic.
Opportunity: The reopening of the pubs rekindled guests’ appreciation of their local pubs. The importance of pubs to social interaction with communities
and individual wellbeing has been reinforced by the crisis. Pubs have an opportunity to build on renewed interest.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
26
Our Principal Risks and Uncertainties continued
7. Political and economic
Risk context
The UK economy could stay
in recession, compounded by
UK Government and the EU
failing to conclude a trade
deal by December 2020.
The risk
High persistent levels of
unemployment could
impact consumer spend in
our pubs, particularly those
with a more premium focus.
The import of goods,
including fresh food, from
the EU could be disrupted.
In the event of disruption, it
could be difficult to source
alternative supplies of food
and drink for the same cost.
The failure to conclude a
trade agreement to date
has increased business
uncertainty regarding the flow
of goods and services to and
from the EU.
UK Government could bring
in additional restrictions for
pubs and lodges to operate.
Pandemic impact
Potential impact
Our costs to import food
and drink could rise
as a result of customs
duties imposed beyond
December 2020.
These costs could also
rise as a result of a lack
of supply.
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.
With little or no scientific
data, pubs can be blamed
for increased rates
of infection.
Mitigation
• Positioning our customised offer at the right price point.
• Lobbying Government on the COVID-19 safety measures
operated within our premises.
• Continual assessment of supply contracts and renegotiation
of terms when they fall due, to protect our business from
customs duties.
• Where feasible, working with our key suppliers to hold
stocks in the UK of food and drink sufficient to cover short-
term disruption.
• Consider alternative sources of supply if our suppliers have
trouble importing goods.
• Effective deployment and management of COVID-19
safety measures.
• Lobby Government to keep pubs open.
• Keep the public’s trust.
Movement – Lower impact: Trade talks with the EU have reached a broad consensus of agreement compared to the position a year ago. However,
significant uncertainty still exists and the scenario of both sides pulling away from talks is a possibility. Irrespective of an agreement, new cross border
controls could still cause disruption to imports from the EU for our suppliers.
Opportunity: Measures brought in by the UK Government will ease the flow of goods when they arrive in the UK during the first half of 2021.
Government investment in the infrastructure of customs handling should thereafter provide greater efficiency during the customs declaration process.
The impact on the UK economy by the pandemic is likely to be felt for a long time. The Government’s preference is for lockdowns at a local level rather
than national, which allows the pubs to operate during the periods in which restrictions are released.
Marston’s PLC Annual Report and Accounts 2020
27
Mitigation
• Anti-virus and firewall protection.
• Access control, password protection and IT
policy adherence.
• Network controls and monitoring.
• Penetration testing and remediation.
• Backup procedures.
• Data recovery plans and rehearsals.
• Raising people awareness regarding IT security.
• Data security policies, processes and training.
8. Information Technology
Risk context
Our business activity is reliant
upon the Group’s IT network
to communicate, operate
effectively, serve our guests,
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.
Potential impact
Reduction in the
effectiveness of operations,
business interruption
and loss of profit.
Regulatory fines as a result
of the loss of data.
The continuous operation of
our business is dependent
upon the uninterrupted
running of our computer
network, site links and
the internet.
Marston’s handles the
personal contact details of
many of its guests who opt to
use the wifi or receive emails,
as well as a large number of
our people.
Pandemic impact
An increase in
homeworking.
An increased cyber
threat as criminals try to
take advantage.
• Raised people awareness regarding IT security.
• Network monitoring increased, additional VPN
capacity provided.
• Homeworking policy communicated.
Movement – Slight net movement: Global cyber risk has evolved in recent years, targeting the theft of personal data, launching ransomware attacks
and intercepting transfers of money.
For many years Marston’s has invested in its network protection, firewall and device monitoring functionality. Marston’s conducts penetration testing on
its network, and each year specific cyber risk reviews are conducted on security by an independent team.
Opportunity: The ability for our support teams to securely work from home, if required, creates greater agility and resilience for our business.
Our engagement with guests creates more digital marketing opportunities, for which security and continuity of our network, as well as the trust of our
guests, is fundamental.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
28
Our Levels of Defence
1. Management Ownership
Our managers are responsible for understanding risks, communicating them
and developing the control environment necessary to mitigate them to a level
which is within the risk appetite of the business.
2. Committee Oversight
The PLC Exec meets regularly to consider how to implement the
actions required to achieve business objectives, and to monitor risks
and opportunities.
Governance framework
The Group operates within a clear set of policies established by the Board,
and the PLC Executive Committee (PLC Exec). Adherence to these policies
governs the parameters within which the business accepts risk. Authority is
delegated through the business to ensure that management is empowered to
operate effectively while staying within the system of governance approved
by the Board. Authority levels are aligned with levels of management and
the degree of responsibility over risk. Changes to policies occur at the
instigation of management, in response to either new threats, legislation or
new opportunities.
In response to the scale and speed with which the pandemic took hold in the
UK, the Group established a Coronavirus Task Force to respond at pace to
the impact on our people, our business, our partners and other stakeholders.
The Task Force was empowered by the PLC Exec to take the necessary
actions and decisions.
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. Policies are communicated to the appropriate
employees. Policies applicable to all our people are communicated
on induction and cross referenced by 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, additional investment and by encouraging achievement.
• A detailed formal budgeting process for all activities, with the annual
budget and projections for future years 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 requirement for all major investment, divestment and
strategic plans and programmes.
• At each of their meetings the Board reviews financial and non-financial
progress towards the strategic goals.
Control systems are designed to manage rather than eliminate risk. By their
nature, such systems provide only a reasonable and not absolute defence
against material errors, losses, fraud or breaches of the law.
The 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. The PLC Exec understand the
business’s appetite for risk, and direct management to collect information
through internal processes in order to measure that the control of risk is within
that appetite. In turn management consider, communicate and implement
the decisions on risk made by the Board and the PLC Exec and report
on effectiveness.
Within our management structure we operate several committees in order to
focus attention upon 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 internal audit testing to the risks. It also conducts
a focused examination of areas where risks are significantly changing.
The Committee tracks the emergence of new legislation and monitors the
Group’s preparation for compliance. New policies are considered by the
Risk & Compliance Committee before submission to the PLC Exec and,
when appropriate, the Board for approval.
Data Security Committee
(chaired by the Group Secretary)
The protection of personal and commercial data is considered.
The representatives on the Committee are those where the risks to the
business are higher: employee data, marketing data, pub operations data
and IT security. Our data security policy and management processes are
maintained to govern legal compliance. All employees receive data training
on induction and at appropriate intervals. Data security guidance is always
available to our employees. Our data security Incident Response Plan
is practised annually in order to guarantee an effective response to any
data breach.
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,
identifies the relevant actions taken by Management and considers progress
of those actions against targets. See our Managing and Nurturing our
Resources and Relationships on pages 30–41 for more information on our
key areas of responsibility including people, guests, partners, suppliers,
community and the environment.
Business Continuity Steering Committee
(chaired by the Corporate Risk Director)
The resilience of the Group to events outside of its control is considered,
and the lessons learned from any actual incidents or scenario tests.
The Committee considers the threats to our continual operation, the resilience
of business to cope with the unexpected and the rehearsal of emergency
plans. Consideration is given to the resilience of our supply chain, their own
planning as well as our ability to seek alternative supplies at short notice.
The Committee is briefed on improvements to IT resilience, its protection from
interference and its recovery plan.
Marston’s PLC Annual Report and Accounts 2020
29
3. Assurance Governance
The Risk team comprises the Corporate Risk Director and the Internal Audit
function. The team reports to the Group Secretary who is a member of the
PLC Exec and can elevate matters regarding risk where appropriate to the
Board. The Corporate Risk Director and the Group Internal Audit Manager
attend the Audit Committee meetings and can raise any concerns regarding
risks independently.
4. Strategic
The PLC Exec is chaired by the Chief Executive Officer and comprises,
amongst others, operational directors who are responsible for the
implementation of strategy and for carrying out actions directed by the
Board, monitoring performance and overseeing risk management and
internal control. Actions required are communicated to the senior managers
within the Group.
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 are recorded in our corporate risk register. The ownership and
assessment of risks is discussed and recorded during bi-annual meetings with
the relevant and responsible managers.
The corporate risk register is shared appropriately with the managers in
order to keep it current and relevant with the business. We use common risk
management tools and language to engender cross functional consistency
and measurement across the Group.
Our Internal Audit plan is developed with reference to the recorded risks and
controls. The effectiveness of the controls at reducing risk to an acceptable
level is tested by Internal Audit 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.
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
testing 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 are 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.
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 Risk team audits the strength of financial controls within the pubs, using
data analysis to identify areas of concern. The results of this testing are
communicated to the operational managers and follow-up audits conducted
to measure improvement. The team also tests compliance by all the tenanted
sites to their drinks contract.
When the pubs were locked down internal audit work focused on areas
which could have increased in risk due to the pandemic, namely health and
safety, cyber security and property maintenance. Our financial auditors
tested the closing and opening cash balances of our sites, particularly where
data analysis indicated anomalies.
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, considering the ability of the business to achieve its
strategic objectives and emerging legislation.
New non-executive members of the Board are inducted into the business
which includes meetings with senior managers, the Executive Committee, the
Finance team and external advisers. This gives new members opportunities
to find out about the challenges for the business, risks and the controls and
processes operated. New members are given a pack of information on
business operations and access to previous Board minutes.
Viability Statement
In accordance with Provision 31 of the UK Corporate Governance
Code 2018, the Directors confirm that they have a reasonable
expectation that the Group will continue to operate and meet its
liabilities, as they fall due, for the next three years. In a downside
scenario, incorporating a further lockdown and pub opening
restrictions at a national level for a two month period in January and
February 2021, the Group would be required to seek amendments to
covenants on its financing facilities. Whilst there is no certainty that these
amendments will be granted (this has been disclosed as a material
uncertainty in the financial statements), given our experiences to date
we are confident of securing these where necessary.
The Directors have determined that a three-year period is an
appropriate period over which to assess viability, as it aligns with the
Group’s capital investment plans and gives a greater certainty over
the forecasting assumptions used. The Directors’ assessment has been
made with reference to the Group’s current position, financial plan and
its principal risks and uncertainties set out on pages 22–27.
To assess the impact of the Group’s principal risks and uncertainties on
its long-term viability, scenarios were applied to the Group’s financial
forecasts in the form of reduced like-for-like sales, the closure of
some or all of its pubs and increased borrowing costs. It is assumed
that the Group’s financial plans would be adjusted in response to
each scenario.
In making this statement, the Directors carried out a robust assessment
of the emerging and principal risks and uncertainties facing the
Group, including those which would threaten its business model, future
performance, solvency or liquidity. Principal risks and uncertainties set
out on pages 22–27 are the result of internal risk management and
control processes, with further details set out in the Audit Committee’s
report on pages 56–58.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
30
Managing and Nurturing our Resources and Relationships
Our relationships with key stakeholders and how we manage and nurture them
are critical to our long-term success. We also recognise the need to manage the
natural resources we rely on to operate and how we can reduce our impact on
the environment around us.
Corporate responsibility is intrinsic to the way we manage resources and relationships. On the following pages we
have set out these relationships, displaying the characteristics of our approach. More information is available at
www.marstons.co.uk/responsibility
We invest
in our people
See pages 31–32
for more information
Engaging with
government
See page 41
for more information
We care about
our guests’ wellbeing
See pages 33–34
for more information
Engaging with
our investors
See page 41
for more information
We support our
partners to grow
their businesses
See pages 36–37
for more information
We celebrate our
local communities
See pages 34–35
for more information
We partner with suppliers
who share our values
See pages 37–38
for more information
Reducing our
environmental impact
See pages 39–40
for more information
Marston’s PLC Annual Report and Accounts 2020
31
• COVID‑19 risk assessments were conducted at all of our sites and
safety measures immediately deployed to reduce person‑to‑person
contact. Our larger brewery sites and depots continued to operate safely
throughout the period.
• Communication links between managers and furloughed employees were
maintained during the lockdown so all team members were kept informed
of any developments.
• Messages from our senior managers including the CEO were issued
promptly following any significant change to guidelines that affected the
business. These explained in clear and supportive language the position
of the business and the actions it needed to take in order to adjust ways of
working and stabilise the business.
• Q&A on the new COVID‑19 safety procedures, employment information
and pay were maintained online for all our people to access.
These documents were updated on a weekly basis in order to respond to
new questions.
• News stories from around the business were shared on weekly basis
through our communication channels including our social media sites.
• Our e‑learning platform Talent Academy Online hosted work and life
related training courses.
• Our messaging focused upon wellbeing recognising that many of our
people were coping with hardship, anxiety and isolation.
Other areas of focus this year
• Through the provision of online training we have reduced the time
needed for completion of induction training for our pub teams to two
weeks. This includes all the essential and relevant knowledge on our
Ways of Working, customer care, safety, food hygiene, licensing and
legal responsibilities.
• Further development of our e‑learning platform Talent Academy Online,
widening its reach to all employees across the business and to take more
advantage of the ability to create our own e‑learning training courses.
Last year, 22,649 learning on‑demand documents were accessed by
our employees.
• Mandatory online training was provided to all our pub employees prior
to the pubs reopening in order to instruct them on the new COVID‑19
safety measures implemented within the pubs, what they should expect
and their part to play.
Apprenticeships
We are proud to have maintained our target of training nearly 500
apprentices again this year, across our pubs and bars, breweries and
distribution network. We have given particular focus to the wellbeing of all
apprentices, as a result of the coronavirus outbreak. We initiated a break in
learning for apprentices during their period of furlough, particularly where
line managers and mentors were not available for support. At the end of
the summer, 87% of apprentices returned to the workplace and resumed
their learning; our focus has been to support them to get back on track and
continue progressing through their programmes.
As part of our commitment to all our apprentices, we have worked with our
partners to develop training programmes that continue to provide support
during the pandemic through virtual platforms and remote progress reviews.
Our interactive online workshops have been a great way for apprentices to
engage with tutors during live learning activities. We have put measures in
place to comply with statutory requirements, Government recommendations,
and to keep everyone safe. We have adapted our learning offer to enrich
apprentices with the skills needed to prepare for the post‑COVID‑19 future.
We plan to continue to invest in the skills and abilities of our people as
part of the Marston’s Apprenticeship Academies at levels 3, 4 and 5; a
blended model of learning, through ‘know it’ webinars, ‘show it’ skills day
masterclasses and ‘live it’ behaviours. In addition to supporting our people
to develop their leadership capabilities, we will continue to engage with the
next generation of school students through our ‘Take 5’ work experience
programme and with parents, educators and careers advisers, promoting
‘Loving Hospitality’, a collaboration with our industry peers.
We invest in
our people
Marston’s recognises the responsibility it
has to its employees; they are its greatest
asset upon which the achievement of our
strategic objectives is dependent.
This year, navigating through the COVID-19 crisis has
been tough on the business and our people, yet it has
provided an opportunity to see the character of our
people and the Marston’s culture shine through.
Caring for our people is at the heart of our philosophy. During the pub
lockdown we worked tirelessly to ensure that our people remained one
team. Our communications were increased to ensure that everyone received
clear messaging on the information they needed to know and act upon,
alongside regular communications focused on morale and well‑being.
We have always believed the long‑term development of our people,
their confidence, skills and experience, is a responsibility of the business,
recognising that it is a critical requirement for sustained commercial success.
Our people were highly anxious when the pubs had to close, and their
livelihoods were put on hold. Therefore, we worked hard to ensure our
people had the trust and confidence that the business would stand by them
during this difficult time. However, inevitably, and regrettably, the ongoing
restrictions have impacted jobs and we have reluctantly concluded that
around 2,150 pub‑based roles have been affected. Furthermore, we have
initiated a full review of overhead costs which will be concluded by the end
of December. These decisions are difficult but necessary due to the ongoing
restrictions placed upon our business at this time. These decisions haven’t
been taken lightly and remain aligned to our core objectives of protecting
the livelihoods of as many of our people as possible and ensuring that we
have a profitable and sustainable business.
On reopening our pubs, our people came back to work enthusiastic to offer
a warm and safe welcome to returning guests and do all they could to bring
back the pub experience that had been missing for too long.
We succeed together because of the alignment of our corporate values with
individual values, in turn contributing to our people’s enthusiasm to strive for
success and to engage happily and safely with our guests.
Supporting our people during COVID-19
Our teams received help from the moment pubs were closed, through reopening
and to this day. The principal ways in which we helped our teams were
as follows:
• 93% of our people were furloughed under the Government’s Coronavirus
Job Retention scheme.
• A one‑team approach was adopted regarding pay and contractual
hours for both furloughed and non‑furloughed employees: with the
exception of a small number of brewery teams, who worked their normal
contractual hours, all employees received 80% of pay for the duration of
the first lockdown period.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
32
Managing and Nurturing our Resources and Relationships
continued
We invest in our people continued
We see first‑hand the impact apprenticeships have on individuals and our
business. Apprenticeships are supporting our people to grow, which is why
we are continuing to introduce more apprenticeship standards and training
partners to meet the development needs of our people at any level, any age
and from any background.
Case Study
Throughout the lockdown period our primary goal was to keep
our people informed, engaged, and motivated. Key to this was to
communicate regularly and directly through emails every Monday,
Wednesday and Friday. We focused on wellbeing, providing lots of
inspiration on how to stay fit and healthy; physically, mentally and
emotionally, by sharing ‘Mid-Week Motivation’ tools and ‘Well-
being Wednesday’ ideas. We also recognised our great teams and
the work they were doing in their communities, both on our internal
channels and on our social media channels, further reinforcing and
recognising the amazing efforts of our people. We also developed a
‘return to work’ microsite specifically created to be a one-stop-shop
for all information, tools and questions for our remote people to tap
into quickly and easily.
Progress against key targets
1. Employee engagement and enablement
In 2019 our scores were strong for engagement and enablement at
68% and 69% respectively; 2% above the UK average. This year
while our teams have been disrupted by the pandemic we have not
carried out a full survey. However, we did survey our teams on our
handling of the crisis, the experience of working from home, and
the communications they have received. The findings showed how
positively Marston’s had informed and supported colleagues. We have
engaged with a new partner to provide a more dynamic platform
to continuously measure engagement and enablement and facilitate
responsive actions.
2. Wellbeing
Support for all our people will be a priority in the year ahead.
We have already increased our internal communications to reach all
employees during the crisis and we intend to maintain this. There will be
a renewed focus upon our ‘One Team’ approach in order to ensure
that our people feel connected and sufficiently confident to express
their thoughts and any concerns, whether working in the office, pub or
at home.
Our People Strategy
Our single people purpose is to engage and enable our teams to deliver
a great guest experience, supporting the business on its journey from
‘Good to Great’. Previously, our strategy served a more diverse audience
across a wider business, but with the beer business having moved into the
joint venture with Carlsberg, we are now focused on a people strategy
that is aligned to, and representative of, the pub business. Our people
strategy is aligned to our three core strategic pillars.
1. We are Guest Obsessed
Our reason for being is to deliver great guest experiences to all who
visit our pubs. Our business will only be as good as the people who
work in it; it is therefore critical that we not only attract the very best
talent but that we ensure everyone who works for us understands the
importance of a consistent guest journey, through mandatory training
modules for pubs teams and central support teams alike.
Closely aligned to our culture and the wellbeing of our people, our
new reward plan will focus on ensuring that we deliver the basics
but also inspire and motivate our people to be the best they can be.
We want our people to feel empowered to take the initiative and be
engaged in the roles they perform.
We strive to attract the very best guest‑obsessed people. Over the
last 12 months we have invested time and resource in improving our
careers websites and developing systems that help to support our pub
General Managers to recruit and hire the very best talent. We aim to
invest in other new platforms that remove the complexity when recruiting
for a more flexible workforce. Our campaign work both for pub and
head office roles is focused upon attracting people with a passion for
hospitality – we only want people who love pubs and want to work for
an ambitious guest‑focused business.
2. We Raise the Bar
We continually strive for improvement in the development of our teams,
seeking to understand how to further enhance the engagement and
enablement of our people by continuously listening to feedback and
supporting managers to take action.
We are developing leadership programmes from Executive level
down to first line management that will embody the values and
behaviours necessary to move the Group from ‘Good to Great’.
Our internal communications are focused on four key priorities: to
inform, to inspire, to engage and enable, and investment in the way
that we communicate to facilitate a greater clarity of focus. We are
committed to building an inclusive culture where people feel welcome
and included for who they are. This inclusiveness applies to all
aspects of employment, recruitment, development and termination of
employment; how we treat each other, and our guests should reflect
the caring culture and values that define our business. Underpinning all
of this is the support we will continue to provide through our weekly
communications to all of our people sharing hints, tips and content
focused on our teammates’ physical, mental and financial wellbeing.
3. We will Grow
We have made good progress in developing our teams. The changes
in internal structures as a result of becoming a pub‑focused operator,
have enabled internal talent to be promoted to senior positions including
the PLC Exec, alongside several strategic external appointments into
other senior management roles. We intend to continue to nurture and
develop our internal talent and successors by promoting from within,
whilst retaining the right balance of external recruitment. We recognise
that we need to get better at how we present and promote ourselves as
an exciting, fun and progressive employer and our teams are working
on representing us as a great place to work. Our vision is to be an
‘employer of choice’, with a rich and diverse mix of people who reflect
the society and communities in which we work and serve.
Marston’s PLC Annual Report and Accounts 2020
33
Supporting our guests through COVID-19
• We have kept our guests and customers informed in anticipation of
reopening of the reasons to visit us and to set out how we have followed
the Government’s safety guidance through our Makes Sense initiative.
• Before reopening, our guest journey for pubs and lodges was carefully
planned with all aspects of the guest experience considered. Our aim
was to ensure guests felt comfortable, relaxed and welcome whilst
reassured about safety.
• Our teams were trained on the new safety measures before the pubs
were reopened to create the best experience from the outset and ensure
our guests were happy to return.
• The Government’s Eat Out to Help Out scheme was tremendously
successful. Our pub teams did their utmost to meet demand within the
operating restrictions to keep everyone safe. 160,000 bookings were
received in one week, outstripping Christmas threefold.
Other areas of focus this year
• In recent years we have reduced the calorie content in our menus
through the use of exciting new products. We have also collected calorie
information on drinks with the aim to communicate this to customers in
the future.
• We continue to work with suppliers to reduce sugar. We have always
ensured new products achieve the current salt reduction targets set by
Public Health England and we are now working to the new 2024 targets.
We are in a good position to achieve these targets given our previous
work in this area.
• We now have a greater range of low and no‑alcohol drinks options.
We offer a wider range of soft drinks, 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, investing in recent
years in new coffee machines to improve the offering to our guests.
We partner with suppliers who source their own Rain Forest Alliance
accredited coffee bean.
• Training on the importance of allergens has been rolled out to all
members of our pub teams, food development team, marketing, customer
services and operations teams. The training has reinforced how high we
value the importance of equipping our teams with the right knowledge
regarding allergens.
• The week beginning 4 April 2020 was our biggest ever week in
Off‑Trade for the brewing division, with over 17,000 barrels of beer being
delivered to supermarkets and independent retailers. In bottles and cans,
that’s equivalent to 4.9 million pints (500,000 more than our busiest ever
Christmas week). This rate was maintained throughout lockdown, ensuring
customers at supermarkets were not disappointed
We care about
our guests’ wellbeing
Our ability to deliver a great experience
to our guests is of the highest priority.
We want to ensure that our guests believe that our
pubs are a welcoming and safe environment, whether
the purpose be to drink, eat or stay. We recognise that
food can be healthy as well as special for our guests,
and we are constantly looking for innovative ways in
which we can achieve this. Detailed information on
food, for example allergens and nutritional values,
is becoming increasingly more important so we have
accurate data capture and effective communication
processes as well as training for team members,
particularly concerning allergens. We listen to our
guests’ preferences and adapt our pubs, brands, food
and drinks to satisfy changing tastes, lifestyle and
curiosity. We maintain a catering hotline for our pubs
every day of the year so that any concerns regarding
food in particular can be immediately addressed.
Our Guest Strategy
The strategy is fundamentally based on these
core elements:
• We are Guest Obsessed – using insight‑led decision making and
dynamically responding to feedback, we aim to improve the quality
of our guest journey and make their stay a happy one.
• Raise the Bar – we constantly seek to raise standards of quality and
guest satisfaction and are doing this through reducing complexity,
more targeted and timely communications, further enhancing
the capabilities of our support specialists and building on our
relationships with our suppliers.
• We will Grow – aimed at our margins, guest loyalty, new visits
and return on investment. We have been working on integrated
category plans, ways of rewarding guest loyalty, additional revenue
opportunities and more disciplined pub investment decisions.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
34
Managing and Nurturing our Resources and Relationships
continued
We care about our guests’ wellbeing continued
Progress against key targets
1. Food information system
We have embarked on a major project to enhance our food information
system. The new system will improve the collection of information from
the supplier on nutrition, allergens, safety and ESG factors.
This information will be delivered through to our pub teams, including the
kitchen team, to ensure that guest choice regarding food, particularly
allergens, is adhered to with the highest degree of accuracy.
2. Drink allergens
We are extending the recording of drink ingredients to highlight
allergens in order to provide clarity to our pub teams and guests.
Case Study
Keeping our guests engaged during lockdown was key – just because
the pubs were closed didn’t stop us from connecting with them through
regular email updates, online pub quizzes and virtual brewery tours.
In anticipation of reopening, we reminded guests of the many reasons
they visit our pubs and clearly set out how we were planning to follow
the Government’s safety guidance through our ‘Makes Sense’ initiative.
Before reopening, we carefully planned our guest journey, ensuring
we followed the safety rules whilst also ensuring that we retained the
familiar and much-loved pub ambience our guests craved after weeks
of lockdown. Our aim was to ensure guests felt comfortable, relaxed
and welcome, while at the same time reassured and safe.
We celebrate our
local communities
Our 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 Marston’s. We encourage our
operators to participate in community initiatives such
as Best Bar None, National Pubwatch and Purple
Flag schemes. Every year we involve ourselves in
community events and this year we have remained
active, supporting people experiencing hardship.
Supporting our communities through COVID-19
• During lockdown some of our pubs including, Queen of Hearts in Runcorn,
Eyre Arms in Calver and the Sessile Oak in Llanelli, helped to collect donated
foods and raise funds. Food parcels for the vulnerable and freshly cooked
meals were delivered to care homes and foodbanks. Fundraising included
virtual quizzes, virtual race nights and a 24‑hour radio marathon.
• Marston’s employee charitable funds donated £10,000 across
20 different charities, and 40 iPads to hospitals and care homes across
the country.
The majority of our pubs were closed for most of the summer period,
however it didn’t stop them from engaging with their communities.
• Most of our pubs participated massively in ‘clap for carers’, often being
the hub of the community during this time, going above and beyond by
putting up banners, posters, even broadcasting music to clap to and
getting their families involved.
• Lots of our pubs did great things at Easter including dressing up and Easter
egg deliveries. They did quizzes, they raised money for local charities, they
donated food to food banks and local people. Many pub partners really
kicked in with deliveries and take‑away, which has been really important for
local communities, especially those who struggled to get out and about.
Marston’s PLC Annual Report and Accounts 2020
35
Case Study
We were proud to receive a letter from the Leader of
Wolverhampton City Council, who commended our draymen
for delivering 90 food parcels a day to vulnerable people.
The dedication and hard work of logistics teammates at the
Wolverhampton distribution hub shone through as they stepped up
to support the local council, delivering thousands of food parcels
to vulnerable people across the city throughout the COVID-19
pandemic. Our experts helped to plan the routes and manage the
emergency deliveries, as well as providing motorised trucks for use
in the temporary food distribution hub. In a letter to our CEO Ralph
Findlay, Councillor Ian Brookfield praised the team for their hard
work, knowledge and expertise: “We have no doubt that the food
distribution hub would not have been created and run so successfully
without your employees’ conscientiousness and hard work.” The
assistance they provided saved lives and helped to protect the NHS.
Other areas of focus this year
• 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.
• Our people are involved in charitable activities, such as Food for
Christmas. We opened up a food bank donation point in our head office
before Christmas 2019 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 hampers to support their
fundraising, packed by our central support teams.
• We promote and support fundraising across our pub estate through our
Community Heroes Week. Regrettably, we had to cancel it this year, as
this annual fundraising event is normally our most active and inclusive event
encompassing our offices, breweries and pubs. Our pubs and team members
get involved in a variety of activities across the country to raise funds for a
number of different charities chosen by our central support teams and pubs.
• We recently launched ‘local legends’ – a campaign led by the marketing
team to identify local people who went above and beyond. Pubs were
able to get communities to nominate their local legend and we’re also in
the process of identifying national legends.
Progress against key targets
1. Encourage our pubs to engage with their
local communities
We intend to increase the number of pubs taking part in our Community
Heroes Week next year to include many more of our managed pubs,
subject to any social distancing measures. Funding during Community
Heroes Week reflects the important role that pubs play in their
area. The activities are supported by our central support teams and
demonstrate how important this is to everyone.
2. To match any contributions made to charities by our
people through the payroll
We will continue to match the contributions of our employees to the
Company’s charitable fund. The generous contributions from our
employees have provided the means to react quickly to charitable
requests during the pandemic.
For more information on community initiatives, please visit the
links below:
Best Bar None: www.bbnuk.com
National Pubwatch: www.nationalpubwatch.org.uk
Purple Flag: www. nbcc.police.uk/guidance/purple-flag-scheme
Marston’s PLC Annual Report and Accounts 2020Strategic Report
36
Managing and Nurturing our Resources and Relationships
continued
• Responding to temporary, local lockdowns has become part of the
trading conditions faced this year by the pub industry. We intend to
give all the support we can to our partners through continued periods of
disruption. Through the pub industry trade bodies, Marston’s will continue
to put the case to Government that pubs operate in a more controlled,
COVID‑19 safe manner than socialising at home.
• We have been very proud to communicate widely through our
communications channels the local stories of how our partners have
supported their local communities and the NHS by fundraising, food
banks and assisting vulnerable people self‑isolating.
Our Partner Strategy
1. Choice/flexibility
From the outset, when someone applies to run one of our pubs, the
key to success is matching the right pub and the right person to the
right agreement. We take time to understand our applicants – whether
they are seasoned publicans with many years of experience, or
have never run a pub before but have a burning ambition to do so.
We offer the most diverse range of opportunities of any pub company,
encompassing retail, tenanted and leased pubs. The type of agreement
will reflect the experience, confidence and ambition of the applicant.
If we think that an applicant is unsuitable then we are honest about that
from the start, recognising that a higher probability of long‑term mutual
success and business growth is essential.
2. Training
All our partners attend induction training and, once they have started,
receive ongoing training through our programme that provides
continued support. Running a pub requires knowledge of licensing,
regulatory, legal, safety and food hygiene rules, many of which are
particular to this industry and are continually evolving. Our training
includes everything a new starter needs to know about pub mechanics
including cellar management, financial management, ordering, stock
control, till systems and marketing. Most importantly, we focus on
how they can welcome and engage with their guests and keep them
coming back.
3. Business support
Our partners are supported by Area Managers who maintain
regular contact and are always there for quick advice or an urgent
need. Our partners benefit from the range of experience which our
Area Managers hold, offering suggestions and advice to keep their
businesses on the right track.
4. Drinks agreement
At Marston’s we understand the important part we play in providing
a comprehensive range of quality drinks at the right price and being
able to vary that offer to meet consumer demand, keeping it current
and exciting. We never take our agreements for granted, constantly
reviewing them, and believe that they represent the best quality and
value for our partners.
5. Investment
We have the utmost pride in our pub estate, recognising that the
character of these buildings is a vital part of the appeal to our guests.
Our estates management team is always available to support with
maintenance to ensure that the buildings are kept safe and open for
business. Our refurbishments programme ensures our pubs are inviting
and interesting places for customers.
We support our
partners to grow
their businesses
Our pub partners are a key part of
Marston’s business and the character
of our pub estate. We recognise the
contribution that a committed partner
brings with the determination to make
their pub a success.
This passion to run their own pub, how they want, is
what their guests love. They are free to innovate and
reflect their own character within the ambience and
offer that they create. We understand the unique
contribution these pubs bring, and the recent lockdown
has highlighted more than ever how treasured they are
across the nation.
Supporting our partners through COVID-19
Never has a year exemplified the contribution that the tied pub model can
bring. With the closure of all pubs in lockdown, partners endured a period
of disruption which they could never have imagined. Having Marston’s as a
partner meant that solutions could be identified together, in order to give our
partner businesses the best chance to survive the lockdown period. The way
ahead still looks uncertain but facing it together should make it less daunting.
• During the first lockdown, our Area Managers worked tirelessly to get
the right advice to our partners on closing their pubs, managing stock,
furloughing staff and conserving cash.
• The range of Government support offered our partners’ businesses a
lifeline. We supported our partners’ understanding of what was offered
and how they could apply for aid so that cash flow could be eased as
soon as possible. In the most desperate cases, Marston’s gave direct
support to keep our partners in business.
• In a situation where no money is coming into a business, the obligation
to pay rent each month can be insurmountable. We recognised the
concerns of our partners immediately by deferring all rent payments in
the first month of lockdown and signalling our openness to listen to our
partners’ requests for extended periods of deferral.
• Once the Government confirmed the date for reopening, Marston’s
was committed to ensuring all our partners who could reopen had old
cellar stock uplifted and new supplies delivered in time. We were able to
support our partners’ preparations for opening by sharing the adoption of
best practice in accordance with Government guidelines.
Marston’s PLC Annual Report and Accounts 2020
Case Study
Communicating and staying in touch with our pub partners during
the COVID-19 pandemic has been absolutely essential. We knew
that our partners would need information, support and help, so we
approached this in the same way we approached communication
for our employees. We quickly developed a microsite for all things
Coronavirus related, creating a portal that was quick and easy for
them to access and navigate to get all the information, tools and
support they needed. We bolstered this by sending regular emails,
outlining specific information about their circumstances, as well as
communicating regularly through closed social media groups, where
our partners could ask questions, raise queries, share ideas, and
also motivate each other during the difficult times.
Progress against key targets
1. Aligning to our strategic pillars, we will benchmark all partner
pubs using the GUEST acronym to assess the current experience.
2. We will work with our partners to focus on the guest journey; we
are trialling an evolution of our turnover agreement for our more
entrepreneurial sites to better reflect a partnership approach and
attract the strongest pub partners.
37
We partner with
suppliers who share
our values
The relationships with our suppliers
are integral to our success. During the
COVID-19 crisis the strength of these
relationships was demonstrated by
our mutual support during lockdown,
followed by the commitment shown
to us in restocking pubs when they
could reopen.
Our guests expect diligence in the ethical sourcing
of goods, products and services, all delivered to an
excellent standard. We seek suppliers who reflect our
own corporate values, which is demonstrated during
the selection process and supported by accreditations.
We audit our food suppliers, albeit this was paused
during the period of lockdown. Our management of
procurement is centralised in order to effectively govern
tendering, contract reviews, authorisations and the
secure transfer of data.
Our Supplier Strategy
Our procurement strategy is built on relationships which create
sustainable profitability for both ourselves and our suppliers.
Our supplier selection process is designed to ensure that sufficient
information is collected by both parties and the arrangement is
mutually advantageous. Knowledge of our suppliers and the proactive
relationship involving suppliers in our business and future plans is
essential to the mutual trust which we strive for. We value long‑term
relationships, as evidenced by the duration of many of our core
suppliers of food and services to our pubs.
The past 12 months has validated this approach to our supply chain.
Our suppliers have supported us during the ongoing uncertainty
caused by Brexit, the sudden lockdown of our pubs, the short
notice to reopen and the adjustment of our business to comply with
COVID‑19 restrictions. At a time when their own businesses were also
fundamentally impacted by the crisis, they have worked tirelessly to
support Marston’s, for which we have tremendous gratitude.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
38
Managing and Nurturing our Resources and Relationships
continued
We partner with suppliers who share our values
continued
Case Study
Supporting our suppliers during COVID-19
• Our pub menus were reduced and simplified on reopening in order to
continue to provide our guests with their favourite dishes at an unsurpassed
quality. We have worked with our supply chain to identify the ingredients
required for these menus and the quantities necessary to meet demand,
in particular to gain mutual benefit during August’s Eat Out to Help Out
scheme. The menu rationalisation has helped our suppliers manage their
own costs and forward plan our stocking requirements.
• Our suppliers have worked with us to manage the uncertainties caused
during successive periods of disruption. The lockdown of pubs suspended
all deliveries to our pubs, resulting in ageing stock left at our suppliers.
Upon reopening we worked with suppliers to maximise the use of in‑
date stock and reduce the potential for waste and lost profit between
our businesses.
Other areas of focus this year
• During the preparations for Brexit, at the end of 2019 our suppliers built up
contingent supplies in case the UK left the EU without an exit agreement.
These supplies safeguarded the continuing supply of our guests’ favourite
meals and drinks, in the event of problems with importing. We continue to
consult and plan with our suppliers to mitigate any impact that may result
from a trade agreement not being reached by December 2020.
• 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 associated employment rights. The Charter
conveys our expectations for suppliers to reduce their own environmental
impact by minimising unnecessary packaging and choosing recyclable
materials wherever possible. The Charter also supports our endeavour to
meet Public Health England’s dietary improvements by reducing calories,
salt and sugar content on our menus. The next update of the Charter will
include amendments that utilise the additional information which will be
collected in our new food information system.
• Support for local businesses – Marston’s is proud to be a strong partner
of local family businesses.
Impact of Brexit
If the UK and EU don’t manage to conclude a trade agreement by the
end of 2020 then the UK would start trading with the EU under WTO rules.
This may mean that our suppliers sourcing goods in the EU, particularly food
and drink, might have to pay a higher import tariff which may then impact the
price that Marston’s pays in the future. Marston’s can mitigate much of this
increased cost by working with its suppliers to seek alternative goods from
either within the UK or outside the EU, but will work with existing suppliers
to find solutions where possible. The UK Government have introduced
measures to ease the flow of goods from the ports during the first half of
2021, however the supply of goods could still experience disruption. A break
in the continuity of supply has been partly mitigated by holding some stocks
of goods, however this is more difficult when the food is perishable, such as
fresh food, and could mean that Marston’s would have to source alternative
products, possibly at a higher cost.
Ethical sourcing
Our preference is to select suppliers who like ourselves seek to reduce their
environmental impact, thereby reducing our supply chain carbon footprint.
An example is our partnership with Yorkshire Greens for our premium peas,
which has the lowest carbon footprint for frozen peas in the industry; they
are 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.
A. F. Blakemore manages the distribution of our food products to our
pubs. When the COVID-19 crisis started their food supply business
was materially impacted. We have worked with Blakemore to find
a mutual resolution to the problems encountered during lockdown,
recognising the significant impact the pandemic has had on both
our businesses and the need for both companies to save costs.
Once trade could resume, our joint innovation has ensured that
guests have been able to return to and enjoy what they like most
about eating at one of our pubs.
We support our supply chain moving to greener energy. Our supplier Accolade
Wines has recently become carbon neutral for all its core branded wines
and aims to become 100% carbon neutral by the end of 2020. This has been
achieved through the installation of a 2.5 MW wind turbine at its distribution
centre, the deployment of solar panels at their vineyards in Australia and for the
rest of the carbon that cannot yet be reduced, partnering with an organisation
working on quality projects to reduce carbon emissions and improve lives.
Modern slavery
This year we have invested in SEDEX which is a platform used to share
information on ethical trading, including employment conditions. We reach
out to existing suppliers on SEDEX to share this information and will encourage
other suppliers to also join. Included in the data shared by suppliers is how
they are responding to the risk of modern slavery, allowing us to follow
up any issues raised. Our full Modern Slavery Statement is available at
www.marstons.co.uk/responsibility.
Progress against key targets
1. Development of a food information system
We have recently appointed NTAssure to develop an integrated smart
food information system to record information on our suppliers and
the food and drink products. For allergens, the new system will include
built‑in algorithms to ensure the information provided is accurate.
Work on supplier and ingredient work streams are almost complete,
and development will continue throughout 2021.
2. Allergen training
We have reviewed all of our policies and procedures relating to
allergens alongside Anaphylaxis Campaign and Food Allergy
Aware. This has allowed us to develop a new guest journey specific
to our guests with special dietary needs. The new guest journey was
supported by the launch of a bespoke e‑learning course that covers the
improvements to the guest journey whilst still providing information on
the 14 mandatory allergens.
Marston’s PLC Annual Report and Accounts 2020
Reducing our
environmental impact
We seek to innovate through our
environmental projects in order
to accelerate the reduction of our
environmental impact.
Our estates team has gained industry recognition for
their pioneering work to reduce emissions at our pubs,
reduce water consumption and increase recycling.
Progress on the Group’s environmental agenda is
reported to the PLC Exec and is a key pillar within
our Corporate Responsibility Strategy. We remain
responsive to emerging technology to prevent further
environmental harm, often at attractive rates of return,
and to partnerships which promote and support a
better environment and better lives.
In December 2020 we were named ‘Operator of the Year for
Energy Efficiency & Sustainability’ at the FEJ Kitchen & Equipment
Awards for the sustainable practices in our pub kitchens. We work
with like-minded suppliers to make sure our equipment is good
value, efficient to run and easy to repair, ensuring the highest
standards across all of our kitchens.
39
Mitigating the environmental impacts of COVID-19
• The lockdown of our pubs presented us with the challenge of disposing of
a high volume of beer safely. Beer is many times more potent than what
normally goes through drains, hence we had to agree with all our water
authorities a safe method for pouring it away and, where necessary, back
haul volume to the brewery for disposal.
Other areas of focus this year
• In 2018 we announced a partnership with rapid electric vehicle (EV)
charge point operator, Osprey (formerly Engenie), to become the UK’s
first pub company to roll out 50kW rapid chargers across our sites
nationwide. The chargers are powered by 100% renewable energy and
can provide an EV with around 80 – 100 miles of range in 30 minutes.
The charging dwell time fits with our operating model, enabling drivers
to ‘top up’ while using the pub’s facilities. Significant progress has been
made over the past year which saw us reach the 100‑site milestone,
making us one of the largest private rapid charging networks in the UK.
• Our water self‑supply licence, ‘Marston’s Water’, allows us to drive
down water usage. Becoming our own water retailer has allowed us to
take control of billing and water data and, with increased water meter
readings we can 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.
• We have invested in energy efficiency technologies in 2020,
including external lighting sensor timers, central heating additives
and installation energy efficiency measures when our properties are
refurbished. We continue to innovate by trialling new energy efficiency
technologies and take energy and lifecycle impacts into consideration for
all procurement.
• Marston’s won ‘Waste and Resource Management Project of the Year’
at the 2020 edie Sustainability Leaders Awards in collaboration with
UKWSL. The award recognised Marston’s partnership work since 2016
on waste reduction and management over the entirety of Marston’s
estate. Marston’s was the first large pub company to achieve zero waste
to landfill in 2018, and went on to exceed its other targets. The operating
percentages achieved during normal trading are at the following levels,
albeit these were disrupted during lockdown:
Recycle food waste at 82% of its food‑led pubs
Segregate dry mixed recycling across 97% of the estate
Recycle glass bottles at 98% of all pubs
Maintain zero waste to landfill
This cultural change has ensured total recycling rates have increased from
60% to 73%.
• 1,000 pub benches have been replaced with recycled plastic ones,
saving 210 tonnes of plastic from going to landfill. They are, in turn,
100% recyclable.
• We have commenced a programme of placing clothes banks in pub
car parks, diverting old clothes from landfill. We aim to have rolled this
initiative out to 60 sites by the start of 2021.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
40
Managing and Nurturing our Resources and Relationships
continued
Reducing our environmental impact continued
Our progress to reduce emissions
Greenhouse gas emissions
Source
Electricity & gas
Petrol & diesel
Refrigerants – breweries
Refrigerants – pubs
LPG
Oil
Total
2020
CO2 tonnes
79,491
12,031
1
5,161
2,118
160
98,962
2019
CO2 tonnes
96,190
13,760
1
4,813
2,719
187
117,670
Greenhouse gas emissions intensity ratio
CO2e tonnes per £100k (turnover)
2020
12.05
2019
10.05
Energy usage
Total
Notes:
2020
mwhrs
447,991
2019
mwhrs
523,944
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 2020, in accordance with the Simplified Energy and
Carbon Reporting regulation.
Total gas consumption compared to last year reduced by 22% which
reflected the temporary shutdown of our pubs during lockdown while our
breweries continued to produce. Electricity consumption decreased by
3%, considerably less than gas. Electricity usage for lighting fell during
the lockdown, however refrigeration within our kitchens to a large extent
remained on because of food stocks. Fuel usage fell by 13% due to our
lorries being taken off the road when the pubs were shut. Our lorries
servicing supermarkets remained on the road during the lockdown.
In order to reduce the energy consumed, we have focused each year on
various initiatives. Our catering equipment is sourced to increase efficiencies
including fryers that filter oil to increase oil life, and high-efficiency chargrills.
All of Marston’s cabinet refrigerators purchased are high-efficiency
hydrocarbon units. We have installed LED lighting in all the internal areas,
and used in our back of house areas integrated movement sensors, reducing
the operational hours of lighting. We have also fitted voltage optimisation
in all of our new-builds and retro-fitted them into over 100 other sites across
the estate.
Case Study
Key initiatives were implemented to mitigate and minimise the
impacts of COVID-19 on the environment. During lockdown,
gas, electric and water consumption data was monitored closely
to ensure inefficiencies were identified and followed through to
resolution. Building management systems were remotely adjusted to
stop equipment running and minimising energy consumption.
Operating Marston’s Water allowed us to quickly reduce water
consumption and costs in line with site closures. Meter reads were
taken following site reopening to establish new trading baselines
and identify further instances of high water consumption. Marston’s
Water also assisted to negotiate terms of beer disposal directly with
water wholesalers. Methodologies were implemented to minimise
the environmental impacts of disposal.
All waste services were suspended during lockdown, eliminating
emissions produced from collections. Following reopening, general
waste, dry mixed recycling and glass collections were reduced
across most premises. Trade levels are reviewed to ensure collections
are kept to a minimum, reducing vehicle movements.
If further COVID-19 restrictions are put in place, we have robust
processes to minimise environmental impacts of the business across
energy, waste and water, which can be implemented quickly.
Progress against key targets
1. Increased recycling and reduce waste
Marston’s has maintained its ‘Zero Waste to Landfill’ status, however
we recognise the importance of reducing packaging and other forms
of waste coming into our pubs in the first place. We intend to engage
with WRAP to increase our commitment to work with our suppliers to
reduce waste.
We expect to continue with the training and awareness campaigns for
our team members to encourage them to segregate waste to maximise
recycling, recognising that our performance can always be improved.
2. Aim to manage CO2 emissions in relation to activity
We will continue to seek reductions in emissions through 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.
Marston’s PLC Annual Report and Accounts 2020
41
Engaging with
our investors
We want to attract long-term equity
and debt investors who believe in and
support our strategy.
Engaging with
government
Government policy decisions impact
the Group and, directly and indirectly,
all of our stakeholders.
This enables us to remain focused on delivering sustainable growth and
maximising return on capital invested, for the benefit of all our stakeholders.
We engage with our investors throughout the year usually through
roadshows, direct meetings, the AGM and the communication of our half‑
year and full‑year results and quarterly updates. Some of this has had to be
curtailed this year due to COVID‑19 and social distancing measures and
we have made greater use of video technology. Our Annual Report and
Accounts and website continue to hold detailed information on our business,
governance and corporate responsibility.
Further details of how we have engaged with shareholders and the key
topics discussed are set out in the Corporate Governance Report on page
48. Here, we have summarised how we engaged with our debt providers.
Key topics raised
• The impact of COVID‑19 on covenants
• The joint venture with Carlsberg
• Cash preservation measures and additional liquidity
Our response
Our CFO and Director of Treasury and Tax worked hard to ensure that
our bank syndicate and bondholders had sufficient understanding of the
impact of COVID‑19, the measures we took and the long‑term viability of
our business. This enabled them to make informed decisions to support the
Group by providing additional bank facilities and agreeing to appropriate
covenant amendments and waivers where necessary.
Regular calls and meetings with the Director of Treasury and Tax throughout
the year, providing updates on trade to help our investors understand
the strategic direction of the business, have strengthened our long‑term
relationships with high levels of trust and a consistency and familiarity with
how each party does business. This regular engagement and collaborative
approach helped secure the necessary covenant waivers during both
lockdown periods, the consents required in relation to the joint venture and
additional financial headroom through the first lockdown period when there
was uncertainty over the reopening date.
As a responsible business, we engage with Public Health England (PHE)
on health initiatives and support government initiatives such as Drinkaware.
As a member of the BBPA and UK Hospitality, we participate in government
consultations and have actively engaged with them throughout the pandemic
to help them understand the impact of the restrictions imposed on the
hospitality sector, the safety in a regulated setting and the lack of clear
evidence tying pubs to the increases in infection levels.
The Government support in the form of the Job Retention Scheme, deferred
VAT and duty payments and business rates holiday was essential and
helped in being able to retain the majority of our workforce whose work had
been suspended as a result of the Government’s restrictions on our ability to
trade. Last year we raised £528.8 million in taxes for the Government; this
year we have raised £384.6 million, and look forward to the future when
we can contribute at more ‘normal’ levels to the Government’s finances.
Key topics raised
• The importance of regular and timely communications from the
Government on restrictions and changes thereto
• The employment benefit pubs offer to young people and in areas of
high unemployment
Our response
In addition to our engagement with the Government concerning the impact
of the pandemic and various restrictions on trade, our team is dedicated
to food and drink safety and compliance. It monitors and, where relevant,
engages with PHE on consultations relating to food and drink.
Our Risk & Compliance Committee monitors emerging legislation and
regulation to assess its relevance, impact and what preparations are needed
to ensure compliance.
Our training procedures and policies are developed to ensure compliance
and we provide and promote a confidential ‘Speak Up’ service to
encourage an open and honest culture.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
42
Non-Financial Information Statement
-
The information set out below, together with signposts to other relevant sections of the
Annual Report, is intended to help assist users in understanding the Group’s position
and approach to the following key non-financial matters: environment, employees,
social matters, human rights and anti-corruption, and anti-bribery.
Our values and culture underpin our Business Model and define our Ways
of Working and the behaviours we expect of our people. The Marston’s
Way directs and guides our people with the help and support they may
need in their working life and links to relevant policies, statements and
operational guidance.
The Group’s principal risks relating to the four key non‑financial matters
are pandemic, health and safety, food safety and political and economic
risk. The following govern our approach to these non‑financial matters
and are designed to help our people recognise and manage those risks.
Ultimately risk management is about control and the way we manage and
mitigate those risks is set out in detail in the Risk Management section on
page 21.
Additional Information
• We aim to provide a safe working environment for all our people and
a business that is run in an ethical and responsible manner. Our ‘Speak
Up’ policy and activities are overseen by the Board and undergo annual
review and campaigns to raise awareness amongst our people.
• The health and safety of our people and our guests is of paramount
importance to us and during this year, our health and safety policies and
practices were continuously reviewed, updated and briefed to our teams
to reflect the latest guidelines and impact of COVID‑19 restrictions.
• The development of our online training platform Talent Academy enabled
us to provide timely online training on the new COVID‑19 safe measures
to all our pub teams prior to pubs reopening.
• We are investing in an enhanced food information system to ensure that
our guests are provided with accurate nutritional information to help inform
their food choices and support their lifestyle choices.
• Our Business Model and our non‑financial key performance indicators
are set out on pages 6–7 and 16–17.
Marston’s Code of Conduct, The Marston’s Way, is shared with all our
employees on our website and includes links to relevant policies, many of
which can be viewed publicly, including the following:
Within the Responsibility section of the website there is more information on
the following:
• Environmental report
• Environmental commitments
• Food Supplier Charter
• Modern Slavery Statement
See: www.marstons.co.uk/responsibility
Information for our people is available from the following sources:
• People Strategy
Summarised on pages 31–32.
• Food information system
Food ingredient information collected from our suppliers used to
formulate our dishes, identify allergens and communicate food
constituents to our guests.
• The Pubs Code
The Pubs Code regulates the relationship between pub companies
owning 500 or more tied pubs in England and Wales and their
tenants. Information is available from the Pub Code Adjudicator
at www.gov.uk/government/organisations/pubs-code-
adjudicator
• Corporate hospitality
Rules to be followed by all staff governing the acceptance of gifts or
hospitality, the approval process and reporting.
• Competition law
Outlines Marston’s overarching commitment and practices to
comply with the relevant legislation on competition law matters.
Anti‑bribery and Anti‑corruption policy
Data Protection policy
Equality, Diversity and Inclusion policy
Environmental policy
Food Safety policy
Fraud policy
Group Purchasing policy
Health and Safety policy
‘Speak Up’ policy
See: www.marstons.co.uk
Marston’s PLC Annual Report and Accounts 2020
Section 172 (1) Statement
The interests of our stakeholders and their values and expectations shape our
performance and success, influencing the way we make decisions. Long‑
term value creation is about more than financial results alone – we recognise
that a sustainable, successful business depends on strong relationships with
our key stakeholders who help create and share in the value generated.
Our Ways of Working and The Marston’s Way articulate our values and
underpin the actions that we take.
The Directors consider that, during the year, they have acted in a way that
promotes the success of the Company for the benefit of its members as
a whole, having regard to the various factors set out in section 172(1),
listed below.
The Board have continued to engage with shareholders throughout
the period in a variety of ways to understand their views and interests.
Details are set out on page 48 of the Corporate Governance Report.
The Board take every opportunity to engage directly with our employees
when visiting our pubs in a personal capacity or, more formal visits as a
Board, with informal presentations and dinners with senior managers from
across the business. This year, we held our first Workforce Engagement
session, hosted by two Board members: Octavia Morley and Carolyn
Bradley and attended by a mixed group of employees from our pubs,
breweries and central support teams. Additionally, the Board receives
feedback from employee surveys and regular briefings from the CEO
and HR Director. Further details of employee engagement are set out on
page 48 of the Corporate Governance Report.
Engagement with suppliers, customers and other stakeholders takes place
at an operational level through the senior management of the business
responsible for the particular area and relationship. The Board receive
regular updates on stakeholder views from the Executive Directors,
members of the PLC Exec and other senior managers along with external
input from advisers.
The interests of all relevant stakeholders are taken into account by the Board
when considering significant strategic decisions. During this year, COVID‑19
and the sale of the beer business into a joint venture with Carlsberg, have
comprised the two most significant strategic events for the Company.
More details of how the Board had regard to stakeholder interests in
considering the impact of COVID‑19 and the joint venture proposal are set
out below. Throughout this report we have set out, in a series of case studies,
how we have engaged with our people, our partners, our guests, our
suppliers and our communities, demonstrating our regard for their interests
as we were obliged to close the pub business without warning for 15 weeks
during the COVID‑19 lockdown. We have also described how we have
had regard to our impact on the environment, specifically in relation to the
destruction of beer left in cellars during lockdown (see page 39).
COVID-19
Throughout these uncertain times, the Board have focused their attention
on ensuring the safety of our people, on the business remaining financially
viable and, on reopening, the safety and enjoyment of our guests. The Board
have provided oversight and counsel to the CEO and CFO as they led
the PLC Exec in managing a safe and orderly closure of pubs and the
consequential impacts, whilst considering the sometimes conflicting interests
of continuing the operation of our breweries to supply supermarkets and
other off‑trade retailers. In addition to regular updates from the CEO
and CFO, the Board have heard directly from the HR Director on several
occasions and the Operations Directors on how the Group looked after its
people, supported its partners and engaged with guests and key suppliers
during lockdown. The Board took a highly prudent approach to managing
the business and, in recognition of the major challenges facing many of our
stakeholders, all Board members volunteered significant pay cuts during
the national lockdown. The CFO led the engagement with our providers
of finance and provided timely updates to the Board of the financial
consequences of, and options for, extended periods of pub closure.
43
The Board’s decisions to strengthen the balance sheet (with additional
financing facility) and to suspend the dividend for 2020 are considered
to be in the best interests of promoting the success of the business over the
long term for the benefit of members as whole. Further details are set out
on page 41.
Continued and varying restrictions across the UK have required the Board to
regularly assess the implications for the business and consider all interested
parties, most notably the impact for our people and the inevitable risk of
job losses. These decisions have not been taken lightly and the Board have
considered the interests of all relevant stakeholders in making the decisions
that they believe are for the benefit of its members as a whole.
Joint venture with Carlsberg UK Limited
In May, the Board approved the joint venture proposal following several
months of considerations covering a number of factors and conflicting
interests when assessing the transaction as most likely to promote the success
of the Company. Details of the deal are described in the Chairman and
CEO Statements on pages 8–11 and within the circular sent to shareholders
seeking their approval of the proposal (available at www.marstons.co.uk).
In reaching its decision to recommend the proposal to shareholders,
the Board had an opportunity to discuss the various implications with
relevant senior managers from within the business, and the Company’s
advisers provided the Board with advice on the terms of the transaction.
The Board considered:
• the long‑term consequences of the proposal and the benefits to members
as a whole in separating the beer and pub businesses;
• the risks in becoming a pure pub‑focused operator;
• the financial benefits of reducing debt and its alignment to strategy;
• the impact on our people – both those transferring and those remaining
– and the importance of clear and timely information;
• the benefits to both guests and partners of an enlarged beer business and
stronger brand portfolio; and
• their duties as Directors to act with integrity and uphold high standards
of conduct.
The information found here and on pages 30–41 form our
s172 statement and demonstrates the Board’s and Company’s
engagement with its key stakeholders, promoting the success of the
Company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business relationships with
suppliers, customers and others;
(d) the impact of the Company’s operations on the community and
the environment;
(e) the desirability of the Company maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly between members of the Company.
Marston’s PLC Annual Report and Accounts 2020Strategic Report
44
Marston s PLC Annual Report and Accounts 2020
’
Governance
Chairman’s Introduction
Board of Directors
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report:
Annual Statement by Chairman
Remuneration Summary 2019/20
Annual Report on Remuneration
Directors’ Report
Statement of Directors’ Responsibilities
45
46
48
52
56
59
59
63
64
72
74
Chairman’s Introduction
45
UK Corporate Governance Code
compliance statement
The version of the Corporate Governance Code applicable to the
2019/20 reporting period is the July 2018 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 principles of the 2018 Code
throughout the reporting period under review. However, due to the
timings of Board changes and Committee appointments, the Company
was non-compliant with Provision 17 of the 2018 Code from 24 January
2020 until 17 June 2020, and with Provision 24 of the 2018 Code from
31 July 2019 until 1 January 2020. Further details are set out within the
Corporate Governance Report. In order to provide a more accessible
report, and to avoid repetition, we have moved certain information that
has not changed year-on-year, to our website www.marstons.co.uk.
Where our response to principles and provisions of the 2018 Code
appear in the Strategic Report, we have provided cross reference details.
We welcome feedback on our approach.
Governance Report
Our Governance Report explains how we have applied the main
principles and, where applicable, provisions of the 2018 Code, through
our governance framework, supporting procedures and the work of the
Board, its Committees and management. We have used the key themes
of the Code to structure this report:
1. Board Leadership and Company Purpose
Read about how we engage with our people and our shareholders
and what has been on the Board’s agenda this year on pages
48 to 49.
2. Division of Responsibilities
Our governance framework and management structure are set out on
pages 50 to 51.
3. Composition, Succession and Evaluation
For details of our approach to training and induction, this year’s external
Board evaluation and our approach to diversity see pages 51 to 54.
4. Audit, Risk and Internal Control
Details of our internal processes and the report from our Audit
Committee start on page 54.
5. Remuneration
For our report on how we have applied our current Directors’
Remuneration Policy and payments made to Directors during the
period, see pages 59 to 71.
Directors with the wider workforce and agreed a plan to achieve this.
During the period, the Committee has also considered remuneration and
reward across the organisation, particularly in the context of the impact of
COVID-19. Details of how the Policy has been applied during the period,
are set out in the Remuneration Committee Report on pages 59 to 71.
Audit
The principal responsibility of the Audit Committee continues to be the
integrity of our financial reporting and internal controls. The report from the
Audit Committee is on pages 56 to 58.
The following pages provide an overview of our key governance activities,
how we comply with the 2018 Code and reports from each of the
Nomination, Audit and Remuneration Committees.
William Rucker
Chairman
Dear Shareholder,
I am pleased to present our Governance Report to you, together with
the reports that follow from the Nomination, Audit and Remuneration
Committees. Each provide an overview of the key activities during the
period, including the impact of the ongoing COVID-19 pandemic.
This year has been particularly challenging and, despite the significant
impact of the pandemic on the business, the Board continued to apply the
same corporate values to all its considerations and decision making. We are
pleased to note that the same approach was applied across the Marston’s
business, reflecting the unique and special culture that is Marston’s.
Our code of conduct The Marston’s Way, 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 all proud to
be a part of Marston’s. The Marston’s Way continues to form part of our
governance framework which is designed to support the delivery of a long-
term sustainable business.
The 2018 UK Corporate Governance Code (the ‘2018 Code’) has applied
throughout the reporting period under review and, having received an
internal briefing on the changes, the Board considers that, with the exception
of the period when the membership of the Audit Committee and Nomination
Committee did not comply with the relevant provisions, we have fully
complied with the principles of the Code. Further explanation of this is set out
on the following pages.
Board effectiveness and succession
This year we carried out an external evaluation of the effectiveness of the
Board and its Committees, facilitated by Equity Communications. Details of
the process, the summary of our findings, plus progress on the actions from
the 2019 evaluation, are set out on page 53.
As announced last year, Octavia Morley joined the Board on 1 January
2020 and Catherine Glickman stepped down from the Board on
24 January 2020. Octavia became Chairman of the Remuneration
Committee on Catherine’s departure.
Succession planning is an important part of our governance process and
we will continue to monitor the composition of our Board to ensure it reflects
the requisite skills and experience needed to guide the Group to achieve its
strategic aims as a focused pub operator.
Profiles of each Director can be found on pages 46 and 47.
Remuneration
The focus for our Remuneration Committee this year has been the
implementation of our new Directors’ Remuneration Policy, approved by
shareholders at our AGM in 2020. We thank our shareholders for their
support of the Policy. 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 reviewed developing market practice
and emerging trends on aligning pension contributions for incumbent
Marston’s PLC Annual Report and Accounts 2020Governance
46
Marston s PLC Annual Report and Accounts 2020
’
Board of Directors
Chairman
N*
William Rucker
Chairman
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 and Chairman of Bizspace Holdings Limited. William’s City
and financial experience, together with his strong stakeholder management skills,
ability to help businesses grow and his previous Chairman roles make him ideally
placed to be Chairman of Marston’s.
Independent
Yes , on appointment
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
Executive Directors
Ralph Findlay
Chief Executive Officer (CEO)
Ralph was appointed to the Board as Finance Director in 1996, becoming Chief
Executive in 2001. Ralph is currently the Senior Independent Director at Vistry Group
PLC and a Director of the British Beer and Pub Association (BBPA).
N
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
Senior Independent Director
R
A N
Carolyn Bradley
Senior Independent Director (SID)
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
Key: Board Committees
A
Audit Committee
R Remuneration Committee
N
Nomination Committee
*
Denotes Committee Chairman
Marston s PLC Annual Report and Accounts 2020
’
47
Non-executive Directors
-
N
A*
Matthew Roberts
Non-executive Director
Matthew is a qualified Chartered Accountant (FCA) and was Chief Executive of Intu
Properties plc until June 2020, having previously served as Chief Financial Officer
from 2010 to April 2019. 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
Group as the chair of the Audit Committee.
R
R
A
N
Bridget Lea
Non-executive Director
Bridget is currently Managing Director (North) at J Sainsbury PLC and has had a
distinguished career working across multiple leading retail brands. She has recently
been appointed as Managing Director – Commercial at BT Group and is due to
start her new role on 28 December 2020. She has held 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. Bridget has been a member of the Board of Governors at Manchester
University since 2018.
A
N R*
Octavia Morley
Non-executive Director
Octavia is currently Senior Independent Director at Card Factory PLC and at Crest
Nicholson Holdings PLC and Non-executive Director at Ascensos Ltd. She 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
March 2017
Past experience
Chief Financial Officer of Gala Coral
Group Limited
Finance Director of Debenhams plc
Independent
Yes
Appointed to the Board
September 2019
Past experience
Director of Stores, Online and Omnichannel
at O2
Independent
Yes
Appointed to the Board
January 2020
Past experience
Executive and Non-executive Chair of Spicers-
Office Team Group Ltd
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
Group Secretary
Anne-Marie Brennan
Group Secretary
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
Balance between Executive
and Non-executive Directors
Male/female representation
on the Board
Tenure of Chairman and
Non-executive Directors
Chairman
Executive
Non-executive
Male
Female
0–3 years
3–6 years
6+ years
Governance
48
Corporate Governance Report
1. Board Leadership and
Company Purpose
Purpose, values and culture
The Board provides guidance and constructive debate in establishing
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 is satisfied that it reflects and, in turn, is reflected by
our purpose, our values and our ways of working; all of which are aligned
to our strategy. The Board monitors the culture and values of the business in a
variety of ways:
• Meeting and talking with employees from our pubs, brewery sites and
central support services
• Reviewing the results of employee surveys, specifically checking the
responses to behaviour-led questions
• Ensuring our policies and practices, particularly relating to pay and fair
working practices, are consistent with our values
• Reviewing whistleblowing mechanisms and reports to ensure they are
appropriate, accessible and meet our expected standards of conduct
The Board supports and encourages good relationships with all our
stakeholders, recognising the importance of the contribution to and impact
on the communities in which we operate and the partners with which we
work. In seeking to understand the views of all our stakeholders, the Board
engages directly with some, including investors and employees, and
indirectly with others by way of sector bodies, reports and presentations
by senior management and advisers. The CEO and CFO provide regular
feedback and ensure the Board is kept up to date on stakeholder views.
In considering all opportunities and risks that the Group faces, the Board
focuses its attention on the long-term sustainable success of the business
which ultimately generates value for our shareholders. All proposals and
business decisions are made for the benefit of the Group’s long-term
sustainability, ensuring they are aligned to our strategy, purpose and values.
The interests of relevant stakeholders are considered as part of that process
and the Board recognises that sometimes there is a trade-off between
different stakeholders, but at all times the Board considers it has acted fairly
and transparently in evaluating a decision.
Engagement with employees
We recognise the importance of engaging with our employees and our
People strategy aims to inform, inspire, engage and enable our people,
using a variety of media through our core channels which include print,
digital, social and email. This year, the Board reviewed the proposed
arrangements for employees during the lockdown period and kept close to
employee communications to ensure the treatment was fair and reflected our
culture and that employees were kept informed as far as possible.
We paused our annual employee engagement this year, focusing on more
targeted ‘pulse’ surveys to monitor employee feedback, during the initial
period of lockdown. The findings of these surveys were then discussed at
Board meetings during the year. More details of the results can be found on
page 17.
We have appointed Octavia Morley, Chairman of our Remuneration
Committee, as our designated Non-executive Director for engagement with
our workforce. Supported by Carolyn Bradley, our SID, the first Workforce
Engagement session was held on 23 January 2020. The session was
attended by a mixed group of employees from our pubs, breweries and
head office support teams. A number of issues were discussed, and we
received positive feedback from the attendees who felt that they had the
opportunity to speak openly and honestly. A number of clear actions arose
from the output of the session and these were discussed at the following
Board meeting.
Following the first session, the intention was to facilitate further sessions, on a
quarterly basis, and align these with our Board meetings, which are normally
held at various pub and brewery locations across our estate, enabling more
employees to have the opportunity to take part. Unfortunately, as a result
of COVID-19 restrictions, no further sessions were held during the period.
We will resume our approach in 2021, when it is safe and appropriate to
do so.
Engagement with shareholders
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 provided by the
Group’s brokers and financial PR advisers. The views and any concerns
are considered by the Board and, in particular, whether any action or
response is appropriate. The Chairman and SID make themselves available
for meetings with the Group’s major institutional investors each year.
Regular announcements on business and financial performance are issued
to the stock market and made available on the Group’s website, which this
year have increased in frequency to provide updates on the consequences
of the enforced closure of pubs and the joint venture deal with Carlsberg.
The investor relations programme is managed by the Executive Directors in
conjunction with our advisers and focuses on engagement with institutional
shareholders, fund managers, analysts and private client fund managers.
Since March, all meetings have been either by telephone or video call.
These calls have covered the interim results, the joint venture with Carlsberg
and COVID-19. During this year, investor focus has been on liquidity and
financial viability and the CEO and CFO have worked hard to reassure
investors by setting out the impact of restrictions and closure, the financing
position and Government regulations.
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.
Under normal circumstances, all shareholders have the opportunity to meet
and communicate directly with the Board of Directors at the Company’s
Annual General Meeting (AGM). Regrettably, due to COVID-19 restrictions
in place at the time of writing this report, we are planning for our 2021 AGM
to be a closed meeting, at which only the minimum number of shareholders
required to form a quorum will be in attendance. Shareholders are
encouraged to submit their questions in advance of the AGM. We will
ensure that each question receives a direct response, with those questions
pertinent to the business of the meeting being published on our website
after the close of the meeting. Our CEO will record his normal presentation,
and this will be available on our website. Details of how you can submit
questions and cast your votes at the AGM are set out in the Notice of
Meeting, which will be made available to shareholders by their chosen
method of communication and is also available on our website. The Board
looks forward to meeting shareholders again when circumstances allow.
To enable all shareholders to vote on all resolutions in proportion to their
shareholding, the voting at the 2021 AGM will be conducted by way
of a poll and shareholders are encouraged to vote as early as possible
ahead of the meeting. 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 2021
AGM are set out in the separate Notice of Meeting.
Marston’s PLC Annual Report and Accounts 2020
49
Analysis of shareholder register by investor type
Private client fund managers 35.55%
Private investors 17.61%
Institutional investors 46.84%
Shareholder engagement summary
Key communication channels
Institutional shareholders
and analysts
Rolling investor
relations programme
Bi-annual written
feedback received
Chairman and SID
available to meet with
largest shareholders
Private client fund managers
Regular meetings with AGM
CEO and CFO
Private shareholders
Annual Report and
Accounts
Website
Board agenda and activities during the year
The Board agenda provides the framework for the Board to shape and
monitor the Group’s progress towards its strategic objectives, its values
and ways of working. The agenda comprises a number of regular reports
updating the Board on financial and operational performance, people
matters, consumer insight and shareholder analysis. The rest of the agenda
is taken up with specific items for discussion or debate, in accordance with
the forward agenda or as required in response to circumstances or events.
Further detail is set out in the table below. The Board met with sufficient
regularity to effectively challenge and monitor the Group’s progress against
its strategic objectives and in response to the impact of the pandemic and
to consider the joint venture with Carlsberg UK. Meetings up until 23 March
focused on the delivery of our strategic and financial plans as previously set
out, having regard to the continuing uncertainty from a political and macro-
economic perspective and the proposed joint venture with Carlsberg UK.
Thereafter, the Board continued to meet to consider the detailed points of the
proposed joint venture, along with the impact of the lockdown on our pubs,
our people, our guests and the financial consequences.
Due to the pandemic most Board meetings have occurred online and, as a
consequence, the programme of pre-Board presentations which take place
the evening before the Board meeting, at which senior management present
on various matters in greater depth and then join the Board for an informal
dinner, was paused from March 2020. The intention is to resume this in
2021, subject to COVID-19 guidelines.
On the Board agenda
2020 strategy day – on the agenda
The Board held its annual strategy day at Marston’s Talent Academy in
Wolverhampton slightly later than usual as a result of the impact of the
pandemic and the joint venture. They were joined by the PLC Executive
Committee (PLC Exec) to consider the future strategy as a focused pub
operator. The key themes of the day covered:
• Market overview and sector analysis, as presented by the
Company’s brokers.
• Defining our pub DNA and communicating it to employees and
other stakeholders.
• Improving operational standards through simplification and
focused training.
• A greater focus on the guest journey and enabling teams to deliver a
great guest experience.
• Instilling greater discipline and accountability in the new
operating structures.
• Financial considerations: budgeting and cost review.
Presentations were received from the pub Operations Directors, the Group
Commercial Director and the Group HR Director which informed open
discussions and debate with the Board.
Strategy and
performance
Guest and customer focus Shareholder
and business operations
focus
Governance
and risk
Leadership and
people development
COVID-19 impact and
re-opening of pubs
Health and safety and COVID-19 Share price performance
safeguards
and investor relations
Risk and risk management
People Strategy
Bank facility financing and
securitisation waivers
Operating plans and targets for
2021, updated for COVID-19
Shareholder feedback and
market perceptions
Evaluation of Board and
Committee effectiveness
Employee engagement
forum and surveys
Joint venture between MBC Guest journey and simplification
and Carlsberg UK
of offer
Year-end engagement and Governance Code, Pubs
Code and other reporting
AGM
obligations
Gender pay gap reporting
Property disposal plans
Regular Brexit updates
Share register analysis
Environmental and
Corporate Responsibility
updates
Executive succession
planning
Results, trading updates and
Annual Report and Accounts
Appointment of new joint
corporate broker
Delegated authorities and
potential conflicts of interest
Marston’s PLC Annual Report and Accounts 2020Governance
50
Corporate Governance Report continued
2. Division of Responsibilities
There is a clear division of responsibility between the roles of the Chairman and the Chief Executive Officer (shown below). These are agreed by the Board.
Further details of the roles and responsibilities of each Board member and the Group Secretary are set out on our website www.marstons.co.uk.
Chairman
is responsible for:
• leading the Board and its effectiveness in directing the Group.
• setting an agenda, style and tone for constructive and open debate.
• the effective contribution of all Non-executive Directors.
• supporting the CEO in articulating the purpose, values and culture.
Chief Executive Officer (CEO)
is responsible for:
• setting and implementing the strategic objectives agreed by
the Board.
• providing clear and visible leadership, demonstrating the values and
ways of working that reflect the Group’s culture.
• leading the PLC Executive Committee and senior management in
managing the business.
• ensuring the Board is aware of shareholder and other
stakeholder views.
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
The governance framework provides a structure of effective management
and controls to measure and assess performance and risk and it facilitates
the sharing of information by encouraging strategic debate and informed
and timely decision-making. Board papers are circulated well in advance
of each meeting to ensure that the Directors have sufficient time to consider
them before the meeting.
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 52, 56 and 59.
The Board is supported by the PLC Executive Committee (PLC Exec) which
comprises key members of the Marston’s management team: the CEO,
CFO, Managing Director (MD) of Marston’s Beer Company (MBC) (until
30 October 2020), two Operations Directors for Marston’s Pubs, Group
Commercial Director, Group HR Director and Group Secretary. The PLC
Exec meets regularly to oversee the implementation of strategy and monitor
performance of the business. This year, in addition to reviewing operational
performance, controls and people matters, the PLC Exec considered and
responded to COVID-19 guidance, the furlough scheme, the closure of
pubs and their reopening following the first national lockdown. The PLC Exec
also considers property proposals, capital investment and new initiatives;
approves internal policies, governance and financial matters within the
authority limits delegated annually by the Board.
Marston’s PLC Annual Report and Accounts 2020
51
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. The Nomination Committee leads the
process for orderly succession planning and appointments to the Board and
senior management, making recommendations to the Board as appropriate.
Having served on the Board since December 2014, Catherine Glickman
stepped down following the conclusion of the AGM on 24 January 2020.
Octavia Morley joined the Board with effect from 1 January 2020 and
was appointed as Chairman of the Remuneration Committee following the
conclusion of the AGM. We consider all our NEDs to be independent and
the charts on page 47 show the balance and tenure of the Board.
Provision 17 of the 2018 Code requires the Company to establish a
Nomination Committee comprised of a majority of independent NEDs.
When Catherine Glickman, a member of the Committee, stepped down
from the Board on 24 January 2020, the Company was not compliant
with this provision until 17 June 2020, when both Bridget Lea and Octavia
Morley joined the Committee. No Nomination Committee meetings were
held during this period.
As reported in the 2019 Annual Report and Accounts, the Company was
non-compliant with the requirement for its Audit Committee to be comprised
of a minimum of three independent NEDs (Provision 24) from 31 July
2019, when Robin Rowland stepped down from the Board and the Audit
Committee, until 1 January 2020 when Octavia Morley joined the Board
and the Audit Committee.
Board training and development
Prior to the lockdown, the NEDs continued to spend days in trade with
members of the PLC Exec and senior management to better understand the
current operational challenges and meet with teams from across 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. The NEDs
also attend external technical seminars offered by professional advisers
and receive internal briefings on emerging legislation, compliance and
regulatory matters as it relates to the Group. 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.
The Group’s induction programme is tailored to each new Director,
depending on their experience and nature of their role on the Board.
Octavia Morley began her induction programme in December 2019, prior
to her appointment to the Board. Octavia met with the CEO, CFO, Group
Secretary and other members of the senior management team to discuss the
Group’s strategy, performance, finances and governance matters; as well
as a tour of Banks’s Brewery in Wolverhampton, and Marston’s Brewery
in Burton, hosted by the MD of MBC. In addition, Octavia 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. Octavia has also had meetings with our financial PR agency and
remuneration advisers. Octavia spent a day in trade with the Operational
Director for Marston’s Pubs and Bars, visiting various pub sites and has spent
time with the Group HR Director to understand the People Strategy and
approach to remuneration across the organisation.
MBC operates a separate management board comprising 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
Board met on a regular basis to review the operational performance of
each channel, capital investment proposals, people matters and strategic
initiatives. During the national lockdown, alongside protecting and
supporting key relationships, the focus was on work towards the joint venture
with Carlsberg UK.
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 Financial Conduct Authority (FCA)
Listing Rules and the Disclosure Guidance and Transparency Rules to ensure
Marston’s PLC meets its obligations.
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 21), our Ways of
Working and The Marston’s Way (see page 6). The work of our supporting
committees is described in the Risk Management section on page 21.
Documents available at: www.marstons.co.uk
• Articles of Association
• Matters Reserved for the Board
• Committee Terms of Reference
• Roles and responsibilities for each Board member
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
Board
Nomination
Audit
Remuneration
Andrew Andrea
Carolyn Bradley
Ralph Findlay
Catherine Glickman1
Bridget Lea
Octavia Morley2
Matthew Roberts
William Rucker
14/14
14/14
14/14
2/2
14/14
12/12
14/14
14/14
–
2/2
2/2
–
2/2
2/2
2/2
2/2
–
4/4
–
1/1
–
3/3
4/4
–
–
3/3
–
1/1
3/3
2/2
–
–
1. Catherine Glickman stepped down from the Board with effect from 24 January 2020.
2. Octavia Morley joined the Board with effect from 1 January 2020.
3. Composition, Succession
and Evaluation
Our Board comprises a majority of independent Non-executive
Directors (NEDs), a Non-executive Chairman (who was independent on
appointment), together with two Executive Directors, supported by the Group
Secretary. A biography, setting out details of their career background,
relevant skills and experience, Committee membership, length of tenure and
external appointments is set out on pages 46 and 47.
Each of our Non-executive Directors are initially appointed for a three-year
term, which is subject to annual re-election by our shareholders and the
annual Board evaluation. This term can be renewed by mutual agreement.
Renewal of the appointment after six years is considered on an annual basis.
Marston’s PLC Annual Report and Accounts 2020Governance
52
Nomination Committee Report
Evaluation and re-election
Having overseen a number of changes to the composition of the Board,
I have spent time getting to know each Director and assessing the overall
performance of the Board. This assessment has been supplemented by
the Board evaluation we undertook during the year facilitated by David
Mensley of EquityCommunications. Details of the process and output,
together with an update on the 2019 recommendations, are set out below.
As part of this year’s 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 to lead the business forward as a focused pub company.
I have concluded that all Directors have been effective in their role during the
year and therefore recommend each Director standing for re-election at the
forthcoming AGM.
Dear Shareholder,
I am pleased to present an update on progress in our succession planning
and development of the Board and senior management.
William Rucker
Chairman of the Nomination Committee
Succession Planning
We have continued to make progress on our succession planning strategy.
Last year we appointed two new Non-executive Directors, both of whom
have a customer-centric focus with operational retail experience; Bridget Lea
joined us at the end of last year and Octavia Morley joined in January of
this year. We 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. This year, we focused on reviewing
the skills and experience of the management team, assessing the leadership
needs required for operating a pub business. We were delighted to endorse
the promotion of Sharon Singh to Director of Operations for our food-led
pubs, along with several other changes designed to improve guest focus
and operational execution. The changes we made last year to allow for the
Directors to be briefed more regularly on operational initiatives by teams in
an informal environment have had to be suspended whilst social distancing
measures and local lockdowns disrupt activities, but we have continued to
receive essential briefings from senior managers through video conferencing.
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 page 54. Currently, three of Marston’s seven Directors are
female. Following a review of how the business will be organised as a
pub-focused operator, senior management changes were made to simplify
the structure and clarify the focus of attention on the guest experience. As a
result of these changes, two members of the PLC Exec and 43% of the senior
management population are female.
Membership
William Rucker (Chairman)
Carolyn Bradley
Ralph Findlay
Catherine Glickman (until 24 January 2020)
Bridget Lea (from 17 June 2020)
Octavia Morley (from 17 June 2020)
Matthew Roberts
Our responsibilities
• To ensure the Board and its Committees have the right balance of
skills, knowledge and experience.
• To plan for the orderly succession of Directors to the Board and other
senior managers.
• To identify and nominate suitable candidates for Executive and
Non-executive Director vacancies having regard to, amongst other
factors, the benefits of diversity.
Attendees
Other Executive Directors, senior management and external advisers
may be invited to attend meetings.
Terms of reference
Full terms of reference of the Committee can be found in the Investors
section of the Company’s website: www.marstons.co.uk
Key activities during the reporting year
• Reviewed the structure, size and composition of the Committees.
• Reviewed the skills and experience of the Executive team, and
consider Executive succession plans to assess the development of a
diverse pipeline of successors.
• Consideration of this year’s Board evaluation process.
• Reviewed the contribution and tenure of each Director before
recommending for re-election.
Marston’s PLC Annual Report and Accounts 2020
53
2020 recommendations
• A reorganisation of the Board agenda to facilitate a number of
online meetings covering the more transactional matters.
• A review of how Strategy Day discussions are integrated with other
key planning areas and revisited throughout the year.
• Succession and people – development of leadership programmes
for our senior management; and setting out our plans to ensure our
new Equality, Diversity and Inclusion Policy creates the inclusive
culture to which we are committed.
• Greater focus on monitoring culture in our pub teams.
• A review of remuneration policy to align it with the new strategy.
• Appoint all NEDs to serve on all the Committees.
Our 2019 recommendations
• A continued review of succession planning at 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.
Update on 2019
• Changes have been made at Board and senior management level
to meet the future needs of the business.
• A number of pre-Board presentations and site visits were made
before lockdown. These will resume when it is permissible.
• The forward agenda is under review to incorporate the key areas of
focus of a pub business.
• The new strategy is centred around the best guest experience and
our strategic framework has been aligned accordingly.
Re-election of Directors
All Directors will offer themselves for re-election at the 2021 AGM. Details of
each Director serving on the Board at the date of this report are set out
on pages 46 to 47 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.
Our Board evaluation
As required by the Code, this year’s review of the effectiveness of the
Board and its Committees was facilitated by an external evaluator.
EquityCommunications Ltd, led by David Mensley, had previously
undertaken a questionnaire-based exercise for the Board in 2013. On this
occasion face-to-face interviews were arranged which, because of
the restrictions caused by COVID-19 measures, were conducted via
video conference.
The interviews were centred on a framework of questions drafted by
EquityCommunications following discussions with the Chairman and Group
Secretary. These focused on the impact of COVID-19, the strategy of the
new pub company and succession planning and talent. All members of
the Board were sent an advance copy of the questions to allow time for
reflection ahead of their meetings. Interviews typically lasted around one
and a half hours and were designed to encourage Directors to participate in
an open, informal and constructive discussion with the facilitator.
Following all the one-to-one meetings, EquityCommunications prepared a
report for the Board summarising the responses to the questions and, where
appropriate, incorporating action points and recommendations for the
Board to consider, alongside their assessment of the Board’s effectiveness.
Key points/strengths noted by EquityCommunications included:
• An open and communicative Board where mutual respect, trust and
support welcomes appropriate challenge.
• A cohesive approach to navigating this year’s exceptional
challenges effectively, spending significant time in making the right
decisions considerately.
• A smooth transition to virtual Board meetings as the impact of social
distancing measures were introduced, supported by sufficiently informative
and timely papers. This came at a time when more Board meetings were
required to consider the joint venture proposal.
• A strong approach to communications, keeping the NEDs informed
against a backdrop of swiftly moving events.
• Effective and efficient Committees that monitor management’s approach
to risk, internal controls, whistleblowing and remuneration practices.
There is an acknowledgment that the Remuneration Committee will need
to ensure that the policy, pay and practices are aligned to the needs of
the new strategy.
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 Non-executive Directors have
welcomed the NED-only catch ups and the opportunity to meet more of
the teams prior to the pandemic and very much look forward to re-instating
these arrangements when circumstances allow. Agreed action points,
together with an update on progress against 2019, are shown below.
The review concluded that the Board and its Committees continue to
operate effectively.
Marston’s PLC Annual Report and Accounts 2020Governance
54
Nomination Committee Report continued
Gender diversity
Number of employees at 3 October 2020:
Directors
Male
Female
4
3
Male
26
Female
20
Male 6,317
Female 6,778
Senior managers
Total employees
Our approach to equality, diversity and inclusion
At the heart of everything Marston’s stands for is our people. We are a
diverse business committed to building an inclusive culture where our people
and our guests feel welcome and included for who they are. We, as a
business, starting with our Board, want to celebrate, include and work with
individuals from all walks, traits and backgrounds in life. Our new Equality,
Diversity and Inclusion policy aims to ensure this commitment is reflected
through three areas of focus:
• How we attract, nurture and develop our people.
• How we ensure our guests have the best experience possible.
• Supplier diversity to ensure inclusive procurement and an inclusive
work environment.
This policy equally applies to our Board members and all of our employees,
regardless of their contract, location or role in the business. We aim to ensure
our inclusivity applies to all aspects of their careers, including recruitment,
selection, benefits and opportunities for training and promotion.
We are guest obsessed and seek to improve the guest experience, whether
travelling and looking for a great night’s sleep or a catch up at their local.
We want to encourage guests to enjoy our pubs, bars and inns in a friendly
and inclusive environment.
We are actively engaged with our supply chain, to ensure modern slavery
does not occur, and that our suppliers share our values and are providing an
inclusive environment for their own teams.
Our vision is to be an employer of choice, with a rich and diverse mix
of people who reflect the societies and communities in which we work
and serve.
Marston’s is a great place to work and our policy reinforces our commitment
to equality, diversity and inclusion, and to having a truly representative
workforce where every member of our team, every guest and every supplier
feels respected, valued and able to be their best. We want to ensure that
equality, diversity, and inclusion is a core part of how we operate, it’s
embedded in our culture, and reflected in our people and their behaviours.
We are committed to:
• Reviewing and adapting our policies and procedures to ensure workforce
diversity and equal opportunities.
• Implementing initiatives that drive an inclusive culture where all employees
feel accepted and valued.
• Promoting a more inclusive environment, which attracts all candidates and
signals our commitment to celebrate and promote diversity.
• Taking an inclusive approach to ensure we attract a diverse pool of talent
and experience.
• The use of clear statements which promote equality and inclusion within
our recruitment process.
• Training our managers and wider teams to increase cultural diversity
awareness, knowledge and skills.
• Encouraging our people to share their experiences and help each other
to understand more about what diversity and inclusion means.
• Authentically telling our diversity and inclusion story and celebrating our
approach – both inside and outside of our organisation.
Our Equality, Diversity and Inclusion Policy can be found on our website.
Marston’s PLC Annual Report and Accounts 2020
55
Going Concern and Viability Statements
The Committee has considered the Group’s assessment of going concern
and viability, including the assumptions and scenario testing applied to
its financial forecasts, particularly in light of the ongoing impact of the
COVID-19 pandemic. The Committee considers a three-year period to be
appropriate for the assessment of viability and is satisfied that management
has conducted a sufficiently robust assessment of the potential downside
scenarios, specifically relating to COVID-19.
The Committee concurs with management that there is a reasonable
expectation that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period to 3 October 2023 and therefore
supports the going concern and viability statements as set out on pages
73 and 29 respectively.
4. Audit, Risk and Internal Control
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 in terminology across the whole
document, alignment of and linkage between strategy, business model,
financials, risk and governance. The accuracy of all information is verified
by supporting evidence. The drafts are submitted to the Board ahead of
final approval to allow the Non-executive Directors time to review, discuss
and, where thought appropriate, challenge the content. The external Auditor
reviews the consistency between the narrative reporting and financial
disclosures and whether it is appropriately weighted to present a fair and
balanced description of the year. The Audit Committee also receives a
summary of the processes undertaken by management to produce the
Annual Report and Accounts, highlighting the methodology of the teams
involved and the input from the external Auditor.
The Board is satisfied that, as a result of these robust processes, they consider
the Annual Report and Accounts, taken as a whole, to be fair, balanced and
understandable and provide the information necessary for shareholders to
assess the Company’s position, performance, business model and strategy.
Risks and internal controls
Whilst the day-to-day management of risk is devolved and delegated to
management, the Audit Committee receives a detailed update at each
meeting on risks and risk management from the Corporate Risk Director
and Group Internal Audit Manager. The Board regularly consider the
risks faced by the Group and undertake a robust assessment of those that
would threaten its business model, future performance, solvency or liquidity.
In addition, they receive reports and updates from the Risk & Compliance
Committee and the PLC Exec.
The Risk & Compliance Committee, chaired by the Group Secretary,
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, considers 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
the focus for annual compliance testing that seeks reassurance that the
Group is complying with relevant legislation as well as its own policies
and procedures.
More details of the Group’s approach to risk management, systems and
internal controls are explained in the Strategic Report on pages to 21 to 29.
Marston’s PLC Annual Report and Accounts 2020Governance
56
Audit Committee Report
Dear Shareholder,
I am pleased to present the Audit Committee’s report for the period ended
3 October 2020. 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.
In light of the COVID-19 pandemic and the impact on the Group’s financial
position as a result of the enforced pub closures, I have held regular
discussions with the CFO and external Auditor and the Committee has met
to discuss the implications for the Group. The financing activity undertaken
as a result of the pandemic’s impact was considered by the Board as a
whole and the Committee has focused its attention on the implications of
COVID-19 on the estate valuation and for assessing the going concern basis
of accounting.
As well as reviewing the Group’s financial statements for the full and
half year, the Committee considers all forthcoming accounting changes.
As Chairman, I also meet independently with the external Auditor, 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.
Matthew Roberts
Chairman of the Audit Committee
Membership
Matthew Roberts (Chairman)
Carolyn Bradley
Octavia Morley (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 Auditor and reviewing
and approving their terms of engagement; specifically overseeing
the transition from PwC to KPMG.
• Reviewing and monitoring the external Auditor’s objectivity and
independence and the effectiveness of the audit process.
Attendees
The Corporate Risk Director and external Auditor 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.
• Considering the key financial matters and related accounting
judgements and estimates.
• Reviewing the main corporate risks and assurances from testing the
systems and processes to manage and mitigate those risks.
• Reviewing the Viability Statement and associated time period.
• Approving the Internal Audit Strategy, Charter and Plan and
reviewing audit outcomes.
• Reviewing and approving the Statutory Pubs Code
compliance report.
• Considering and reviewing the activity and effectiveness of the
‘Speak Up’ Policy.
Marston’s PLC Annual Report and Accounts 2020
57
The success factors expected from the appointed firm were communicated
during tendering, in particular:
• The experience in our market sector.
• The time and resource which could be brought to the engagement.
• Access to specialists.
• Technological tools.
• Seniority of the partner and the team.
Since selection after the tender process, KPMG have increased their
knowledge of the business, and been able to closely shadow the outgoing
auditor during 2019 to guarantee a smooth transition. Following the tender,
the KPMG audit team has changed since the original proposal, including the
partner retiring. The Committee has observed however that the knowledge of
our business has been effectively transferred to the new audit team.
KPMG have attended all the meetings of the Audit Committee this year,
during which they have explained in detail their audit methodology and their
planning for the audit. During the engagement KPMG have demonstrated
a sound understanding of the control environment of Marston’s and of the
top risks that could impact upon their performance. For each risk identified,
KPMG provided a detailed response to the Committee explaining how the
audit work would be scoped.
KPMG have recognised that COVID-19 has brought additional risk to the
performance of the audit this year. During their planning they have been
assiduous in setting out the individual impacts of the pandemic on the audit,
any increased risks of misstatement, and any challenges that might arise
during the audit itself, including:
• Planned scope and timing – impact of lockdown.
• Materiality – impact of uncertainty on forecasts.
• Subsequent event disclosure – increased likelihood to disclose.
• Going concern – increased levels of uncertainty.
• Accounting estimates – higher degree of estimation uncertainty.
• Sufficient appropriate audit evidence – additional time required.
KPMG have supplied a letter to the Committee explaining why, in their
professional judgement, they are independent and that the objectivity of the
partner and audit staff remains unimpaired. The letter confirms the firm’s fees
from non-audit related services are below the cap stipulated by the FRC
Ethical Standard, and a subsequent letter at the final meeting was provided
re-confirming this. KPMG have confirmed that there have been no matters to
disclose that might have conflicted with their audit judgement.
The FRC’s Audit Quality Review (AQR) team routinely monitors the quality
of the audit work of UK audit firms through inspections of sample audits and
related procedures at individual audit firms. The FRC selected the Group’s
FY19 financial statement audit by PwC, our previous Auditor, as part of that
routine quality monitoring process. The FRC’s AQR report on Marston’s audit
in 2019 contained detailed points regarding the approach adopted by
our previous Auditor. The Committee considered whether the findings of the
review process were significant, and discussed these findings with KPMG,
who are cognisant of the detailed points raised and are satisfied that their
own audit meets those requirements.
External Auditor
KPMG assumed the role of external Auditor at the start of this financial
period having worked with our previous external Auditor to ensure a smooth
transition from the last financial period. The external Auditor attends each
meeting, providing the Committee with an opportunity to discuss the integrity
of the Company’s financial reports. The Audit Committee Chairman has also
met with the external audit partner on a number of occasions during the year
to discuss preliminary findings and views on key matters. The Auditor presents
their audit strategy, findings and conclusions in respect of the Annual Report
and Accounts and Interim Results.
Noting the approach to objectivity, independence, consistency of
professional standards, ethics and integrity that the Auditor applies in respect
of all services provided to the Group, and taking note of the procedures
KPMG have in place to safeguard their independence and objectivity,
the Committee is satisfied that the Auditor is independent and the objectivity
of the audit partner and staff is not impaired. In assessing the work of the
Auditor in this their first year, the Committee considered their processes, the
changes in audit approach from the previous external Auditor, the impact of
COVID-19 on the audit, and their assessment of the Group’s significant risks
and other areas of audit focus. The Committee is satisfied with the scope of
their work, their conduct and their effectiveness.
Non-audit services
The external Auditor is responsible for the statutory audit and the Committee
accepts that some non-audit work is most appropriately undertaken by
the external Auditor. Such work is governed by the Group’s policy on
the provision of non-audit services by the external Auditor and must be in
accordance with the Committee’s terms of reference. The policy is available
on the website at www.marstons.co.uk/corporate/profile/governance.
The purpose of the policy is to safeguard the objectivity and independence
of the annual audit and sets out the approvals required according to the
fees involved. The Company has also used other accounting firms for some
non-audit work including the joint venture with Carlsberg UK, tax advice in
respect of research and development claims, the automation of certain tax
compliance processes and NMW compliance. In each case, consideration
is given to the need for value for money, experience and objectivity required
in the particular circumstances when assessing whether the Auditor is the most
appropriate provider of the work in question.
External Auditor effectiveness review
This year the Audit Committee has documented their review of the external
Auditor. The Committee recognises that this is a continual process, and that
it is appropriate in the Annual Report and Accounts to bring the reader’s
attention to the most salient points.
The external Auditor KPMG was appointed in 2020 following a tender
exercise run in 2017, the delay in appointment was to retain the experience
of the outgoing auditor in respect of our accounting for leases pre IFRS 16.
The Audit Committee was satisfied that the tender process leading to the
appointment of KPMG was conducted in an appropriate manner to ensure
that a high-quality audit would be delivered:
• Management teams across the business were involved in the
interview process.
• Audit firms were given sufficient information on which to base a tender.
• Firms involved the partners and team members expected, at the time, to
deliver the audit.
• The firms were independent from the business.
• The final decision was a collective one by management, taking into
account the relative strengths and experience of the firms.
Marston’s PLC Annual Report and Accounts 2020Governance
58
Audit Committee Report continued
Internal Audit function
The Corporate Risk Director and Group Internal Audit manager attend each
Committee meeting to provide regular updates and ongoing assurance on
the Group’s main risks and internal controls. The findings from internal audits,
together with progress on actions identified, are reviewed and considered.
As announced last year, the Committee oversaw the tender process for the
Internal Audit co-source and endorsed the appointment of PwC, which was
finalised in January after the conclusion of the 2020 AGM.
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 2019 to
31 March 2020.
During the reporting period, Marston’s were not subject to any investigations,
enforcements or representations of unfair business practices by the PCA.
Seven 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 have been awarded against Marston’s on the grounds that it did not
comply with the requirements under the Pubs Code. Remedial actions have
been implemented in respect of each case.
During the reporting period, all of Marston’s Business Development
Managers received updates and training on the Pubs Code.
Significant financial judgements and estimates
As expected in a period where the business has been significantly impacted
by the pandemic, the most significant areas of financial judgement are
related to going concern and the valuation of the Group’s pub portfolio.
Going concern
The Committee and the Board considered management’s assessment of the
Group and the Company’s ability to continue as a going concern, based on
the going concern assessment period, being the period of 12 months from
the date of signing these financial statements. The Committee noted that the
Group is expected to have sufficient cash headroom throughout the going
concern assessment period but that a severe downside scenario, which
incorporates the impact of a further lockdown, will require further covenant
waivers from its lenders in order for the Group to meet its liabilities as they
fall due. The Committee recognises that this would represent a material
uncertainty over the Group’s ability to continue to trade as a going concern
over a period of at least 12 months from the date of this report (but are
satisfied with and supportive of management’s assertions that such waivers
would be secured.)
Valuation of the estate
The valuation, and resulting impairment charge of £243.9 million, was
conducted by management and was based on three key assumptions
relating to Fair Maintainable Trade, trading multiples and vacant possession
value. Noting that the estimates attached to these assumptions are inherently
subjective and small changes in the assumptions could have a significant
effect on the overall valuation, the Audit Committee considered the
methodology applied by management, recent transactions in the market
and the uncertainty created by the long-term impact of COVID-19 on
future earnings. The Committee met with the Executive Directors and the
external Auditor in July, October and December to discuss the valuation
process, the audit thereof and the key issues arising. As a result of these
reviews, the Committee is satisfied that the valuation of the estate, after an
impairment of £243.9 million, is appropriate and considers the long-term
impact of COVID-19 and that the disclosure of the range of reasonably
possible outcomes appropriately reflects the increased uncertainty around
future expectations.
Valuation of goodwill in relation to pubs and bars
The Committee considered the impairment assessment over the goodwill
allocated to the Pubs and Bars segment. Noting that the key assumptions
used in determining this value are the discount rate assumption, cash flow
projections derived from the Board approved budget and five-year strategic
plan and long-term growth rates, the Committee supports management’s
conclusions that it is appropriate to eliminate entirely the carrying value of
goodwill allocated to the Pubs and Bars segment.
Valuation of derivative financial instruments
The Committee considered the methodology applied by management to
determine the valuation of the Group’s interest rate swaps, recognising
that the values are highly sensitive to the assumptions around discount
rates, analysis of credit risk and yield curves. Particular attention was paid
to the model used to calculate the credit risk adjustment noting that it was
comparable to companies with similar credit risks when assessed by the
auditors. The Committee is satisfied that the valuation has been arrived at
after a robust and thorough process and concurred with the presentation of
interest rate swaps as disclosed.
During the year, the Committee also considered a number of other items
of significant risk that impact on the presentation of the financial statements,
including retirement benefit obligations and level 3 assets, and the impact of
uncertainties due to the UK exiting the European Union. The Committee was
comfortable that the assessments made and disclosures set out in this report
are acceptable and appropriate.
Marston’s PLC Annual Report and Accounts 2020
Directors’ Remuneration Report
Annual Statement
59
Following completion, Marston’s is now a focused pub and accommodation
business, and in our Strategic Report we have set out our revised strategy
comprising three pillars:
1. We are Guest Obsessed
2. We Raise the Bar
3. We will Grow
Our People Strategy on page 32 is aligned to this revised strategy
and, as the revised strategy is implemented, we will continue to review
workforce related remuneration and polices, together with our Directors’
Remuneration Policy, to ensure they remain aligned and fit for purpose.
Performance measures and targets will be reviewed in the context of the
revised strategy and, should we propose any significant changes, we will
engage with our shareholders as appropriate.
Directors’ Remuneration Policy
Our current Remuneration Policy became effective from the close of the
2020 AGM and the following pages describe how the policy has been
applied in 2019/20. Rather than reproduce the full policy in the Annual
Report on Remuneration, we have provided extracts from the policy
alongside its implementation during the year. The full policy can be found
on pages 57 to 64 of the 2019 Annual Report and Accounts and is also
available in the Governance section of our website (www.marstons.co.uk/
investors/company-profile).
Review of the year
Performance
Both the Chairman’s Statement and CEO’s Statement report on our
performance in 2019/20 and on the financial consequences of pub
closures, restrictions on reopening and local lockdowns which resulted
in significantly reduced profit. The underlying loss before tax was
£22.0 million (2019: £95.1 million profit).
Performance outcomes for the year
Salary and fees 2019/20
During the period of the first UK lockdown from March until July 2020, whilst
93% of the Group’s workforce was furloughed under the Government’s
CJRS, those employees who continued to work to support the business were
asked to accept a 20% reduction in their salary during the period from April
to July 2020, with normal salaries paid from August 2020. The CFO and the
Non-executive Directors also volunteered to accept the same 20% reduction
in their respective salary and fees.
The Chairman volunteered a 50% reduction in his fees and our CEO reduced
his salary to £250,000 over the same four-month period of closure; a 56%
reduction in salary. These reductions contributed to the cash preservation
measures during the period and the Committee is grateful to our people for
accepting the reduction.
Annual bonus 2019/20
With the underlying loss before tax of £22.0 million and free cash flow
(FCF) for the period of £67.0 million, neither threshold for the annual bonus
performance measures were met. Based on these results no bonus is
payable to the Executive Directors; further information is given on page 65.
Whilst no payments were earned under the Group Annual Bonus Scheme
for the 2019/20 financial period, a number of employee groups were either
on target to achieve budget for the reporting period or continued to work
throughout the first lockdown period under challenging conditions and in
unprecedented times.
Dear Shareholder,
I am pleased to present our report for the period ended 3 October
2020 and my first as Chairman of the Remuneration Committee. In this
unprecedented year, our focus has been to ensure that we take a fair,
prudent and balanced approach to remuneration across the Group, taking
into account the experience of our employees, shareholders and other
stakeholders during the year.
At the 2020 AGM, shareholders approved our revised Directors’
Remuneration Policy with more than 86% of votes cast in favour. We were
pleased that our shareholders continue to support and endorse our
remuneration framework. The Annual Report on Remuneration describes
how the Directors’ Remuneration Policy has been applied for the period
ended 3 October 2020, and how we intend to implement the Directors’
Remuneration Policy for the 2020/21 financial period is provided on pages
64 to 71.
Strategic and business context
In the period under review we faced the challenges of the global pandemic,
with our entire pub estate closed for 15 weeks from March until July 2020
and then the majority again in November 2020. The significant impact of
COVID-19 on our business, our employees, suppliers, the communities in
which we operate and other stakeholders continues to be felt as, at the
time of writing, we remain subject to restricted trading according to local
tiers. We are grateful for and acknowledge the continuing efforts of our
employees, suppliers and other partners, together with the support received
from the Government through the Coronavirus Job Retention Scheme (CJRS).
Regrettably, the ongoing restrictions will impact jobs, and we have reluctantly
concluded that around 2,150 pub-based roles, which have remained
furloughed since the first lockdown period, have been impacted. We are
mindful that our shareholders have also been affected by the decision, made
in response to the impact on trading by COVID-19, to suspend dividends
for the reporting period; future dividends will be reviewed when normalised
trading resumes. Both our CFO and our Director of Treasury and Tax have
worked with our bank syndicate and bondholders throughout the year,
securing additional bank facilities and covenant amendments and waivers,
protecting our operational liquidity during the continuing disruption to
trading, caused solely by the pandemic. This, along with a number of other
prudent cash management measures, has helped us to achieve a lower net
debt figure in 2020 than the previous period.
Despite this period of closures and ongoing uncertainty, we have
successfully completed the transformational joint venture between Carlsberg
UK and Marston’s Beer Company. We retain a significant interest in the new
business through our 40% investment and we look forward to building on
the relationship with Carlsberg and seeing the Carlsberg Marston’s Brewing
Company grow and deliver on the opportunities available to it.
Marston’s PLC Annual Report and Accounts 2020Governance
60
Directors’ Remuneration Report
Annual Statement continued
In order to recognise and reward the individual contribution of these
employees, a number of awards were earned during the period.
• The beer business achieved budget for the first half of the period and
was forecast to be on budget for the full 2019/20 period. The business
continued to supply off-trade customers during the first lockdown
period, with exceptionally high levels of demand for the time of year
and c.1,500 employees will receive a 100% on-target based bonus
payment. These payments will be pro-rata for those employees who were
furloughed during the period.
• A small group of employees within our pubs team (c.30) were achieving
budget up until the enforced closure of the entire pub estate in March
2020. Those employees will receive a 100% on-target bonus payment,
pro-rated for the five full periods where performance achieved budget.
• Around 180 employees who supported the business through the first
lockdown period, with salary reduced to 80% but working their full-time
hours, will be paid a 2.5% salary recognition payment in respect of their
contribution to business continuity during the first lockdown period.
• A small group of individuals within the Group Services team (c.40),
went ‘above and beyond’ in their efforts to support the business during
the first lockdown period and afterwards to ensure that the joint venture
with Carlsberg UK completed, securing financial stability and managing
people related matters during the COVID-19 crisis. To recognise their
efforts these individuals, who also received 80% of salary from April to
July 2020, will receive an exceptional bonus payment equivalent to their
normal maximum bonus opportunity.
With the continuing uncertainty caused by the enforced closure of pubs
under additional regional and national lockdowns, these payments have
been deferred to January 2021, for beer business employees, and to April
2021 for the remaining groups of employees.
LTIP 2017/18
The three-year performance period for the LTIP award made in December
2017 ended on 3 October 2020. Each of the three performance measures:
CROCCE, FCF and relative TSR failed to reach threshold performance of
10.5%, £300 million and median respectively. The award, therefore, has
lapsed for all participants. Further information is provided on page 66.
Alignment of the Directors’ Remuneration Policy
with the Code
When determining the application of the Directors’ Remuneration Policy,
the Committee considered the clarity, simplicity, risk, predictability,
proportionality and alignment to culture as set out in the 2018 Code.
We operate simple variable pay arrangements, which are subject to
clear performance measures aligned with the Group’s strategy and the
interests of all stakeholders. The application of recovery provisions (malus
and clawback) enables the Committee to have appropriate regard to risk
considerations. In addition, the large shareholdings of the Executive Directors
and the operation of a post-employment shareholding guideline further
align the interests of our Executive Directors to serve the long-term interests
of the Company and shareholders. As part of our culture, in determining the
Remuneration Policy, the Committee was clear that it should drive the right
behaviours, reflect our values and support our Group purpose and strategy.
Other key activities of the Committee during the year
• Approval of the Directors’ Remuneration Policy for recommendation
to shareholders.
• Review of the Group Reward Plan – building reward structures that are
relevant, engaging and sustainable for all our people.
• Pension arrangements for incumbent Executive Directors, as outlined
further on in this report.
• Consideration of pay review proposals for the Executive Directors,
the Chairman, senior management and the wider workforce.
• Reviewed the impact of COVID-19 pandemic on employees: their
commitment during the period, wellbeing and reward.
• 2020 bonus outturn and 2017/18 LTIP award vesting, as outlined above.
• Consideration of targets for Group and senior management
bonus schemes.
• Consideration of SAYE and LTIP grants.
• Review of Executive Directors and senior management shareholdings
in the Company, in the context of shareholding guidelines.
• CEO pay ratio reporting.
Looking forward to 2020/21
Executive Director pay and the broader workforce
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. Further information is detailed in our Corporate
Governance Report on pages 48 and 71.
In October of each year a paper is submitted to the Committee by the
Group People Director summarising the outcome of any annual reviews
made to the wider workforce. This includes head office and supply chain
employees but excludes pub based staff as the majority of these employees
have their remuneration rate set by statute rather than the market. This paper
is taken into account when setting Executive Directors’ remuneration effective
from the start of October for the following 12 months. In addition, and where
relevant, a similar paper is submitted in October covering the decisions taken
by the Executive Committee relating to bonus payments for employees within
the wider workforce. This is taken into consideration by the Committee when
approving bonus awards for Executive Directors.
Pay award effective 1 October 2020
The annual pay review, usually carried out in April, was postponed until
October 2020 due to the period of uncertainty and the first UK lockdown.
In recognition of the salary reductions made to preserve cash, together with
the commitment, effort and resilience demonstrated by our people during this
challenging period, a 2% pay increase was approved with effect from the
2020/21 financial period. In the context of the wider workforce pay review,
the Committee reviewed the salaries paid to Executive Directors and an
increase in base salaries of 2% was approved.
The Chairman and other Non-executive Directors fees were last reviewed
in 2017/18. My fellow Non-executive Directors and I, however, agreed
that a review of our fees was not appropriate this year. The Board, therefore,
will review Non-executive Director fees, and the Committee will review the
Chairman’s fees, in October 2021.
Retirement benefits
As reported in the 2019 Remuneration Report, in response to shareholder
feedback on our policy, our CEO volunteered to reduce his pension
provision to 20% of salary. The Committee continued to monitor and review
developing market practice and investor views during the period, noting the
expectation that these will align to the contribution rate available to the wider
workforce by the end of 2022.
Marston’s PLC Annual Report and Accounts 2020
During the course of the year, the Committee reviewed our approach to
reducing pension contribution (or cash in lieu of pension) entitlements for our
existing Executive Directors. With the agreement of our Executive Directors,
we are committed to reducing pension entitlement to 7%, this being the
contribution rate available to the majority of employees who participate in
the Group Personal Pension Plan (GPPP). We are proposing to achieve this
by a phased approach. For FY 2020/21, the pension contribution rate for
both Executive Directors will reduce to 18% of salary. The Committee will
review the contribution rate again during the 2020/21 financial period with
the intention of reducing pension provision for the existing Executive Directors
to 7% no later than 2023/24. We will keep the timeframe for this phased
reduction under review.
Annual bonus for 2020/21
For the 2020/21 annual bonus scheme, no changes in quantum are
proposed in respect of the Executive Directors, which will remain at 100%
of salary. To reflect the uncertainty surrounding the impact of COVID-19 on
current trading conditions, the current pay-out at threshold of 20% will be
retained but on-target performance will result in a 40% pay-out, instead of
the normal 50% pay-out.
As shown in the table on page 61, the weighting of the financial measures,
profit before tax (PBT) and FCF, has been adjusted from 60% to 25% of
maximum and from 40% to 30% of maximum, respectively. The Committee
has agreed to apply a higher weighting for FCF than PBT on the basis that
there is increased focus on management to preserve cash during this period
of uncertainty as a result of COVID-19 and enforced UK Government
lockdown closures and restrictions.
The bonus will include the introduction of two new strategic objectives and
one new financial objective to align with our revised strategy (for more
details on our revised strategy and updated KPIs, see pages 13 to 17).
The first strategic objective will focus on the successful implementation and
managed transition to the joint venture with Carlsberg UK, underpinned
by the seamless delivery of the Transitional Service Arrangements (25% of
maximum); this is a key target for the transformation of the business to a pure
pub and accommodation business and protects our interest in ensuring
the delivery of the joint business plan. The second strategic objective will
focus on our guest satisfaction scores which are a key strategic focus for the
retained business (10% of maximum). The financial objective will be focused
around the delivery of a cost reduction programme, specifically in regard
to overhead savings for the simplified retained business (10% of maximum).
The strategic measures are aligned with those applied to our senior
management bonus scheme.
Strategic pillar
We will Grow
Performance measure
Profit before tax (financial)
Free cash flow (financial)
Successful implementation of
the transition period for the
Carlsberg JV (strategic)
Guest satisfaction scores
(strategic)
We are Guest
Obsessed
We Raise the Bar Cost reduction programme
% weighting for 2020/21
25%
30%
25%
10%
10%
(financial)
The Directors consider that the annual bonus targets for 2020/21 financial
year 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 pay-out delivered
relates to performance against the targets on a retrospective basis.
61
Membership
Octavia Morley (Chairman) (joined Committee on 1 January 2020
and became Chairman on 24 January 2020)
Catherine Glickman (Chairman until 24 January 2020)
Carolyn Bradley
Bridget Lea
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.
• Establishing remuneration schemes that promote long-term
shareholdings by Executive Directors, that support alignment with
long-term shareholder interests.
• Designing remuneration policies and practices to support strategy
and promote long-term sustainable success, with remuneration
aligned to the Group’s purpose and values, linked to the successful
delivery of our long-term strategy. Choosing appropriate
performance measures and targets for annual and long-term
incentive awards; exercising independent judgement and discretion
when considering awards and pay-outs, taking account of Group
and individual performance, and wider circumstances.
• When determining remuneration policy and practices, considering
the Code requirements for clarity, simplicity, risk mitigation,
predictability, proportionality and alignment to culture.
• To consider remuneration policy in the context of the wider workforce
benefit structures, pension provision and remuneration trends across
the Group and challenge, when necessary, to ensure alignment.
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 Andrew Andrea
(the CFO) and senior management. Group HR Director, Liam Powell
and Assistant Company Secretary, Michelle Woodall, 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 £14,936
during the year in respect of advice given to the Committee, and also
provided advice during the year in relation to VAT and the operation of
the Company’s share plans.
Terms of reference
During the period, the Committee has 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
website www.marstons.co.uk
Marston’s PLC Annual Report and Accounts 2020Governance
62
Directors’ Remuneration Report
Annual Statement continued
We believe that the post-employment shareholding guidelines for Executive
Directors, as set out on page 70, are reasonable and align with shareholder
interests. We do intend to keep the evolving market practice in this area
under review.
We welcome all feedback from our shareholders as it helps inform our
thinking on remuneration matters. We will continue to engage with you 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. In light of the continuing
restrictions in place due to the global pandemic, I am disappointed that I will
not be able to meet with you at our 2021 AGM. Provision has been made
for shareholders to put their questions to the Board and I encourage you
to engage with us on any matters regarding remuneration of our Directors,
senior management and our wider workforce.
Octavia Morley
Chairman of the Remuneration Committee
LTIP for 2020/21
Awards under the Long Term Incentive Plan would normally be granted
annually, in December. Due to the continuing global pandemic, and the
possibility of further national and local lockdowns and restrictions, target
setting is challenging. In addition, the negative impact of the pandemic
on our share price may cause windfall gains, if awards are granted at the
normal levels. The Committee has agreed to postpone the LTIP grant until
later in the financial period, by which time we may have more visibility as to
future trading. The Committee has discretion to amend the vesting outcome
where it considers that the formulaic outcome is inappropriate. In particular,
the Committee will consider whether there has been any ‘windfall gain’ when
determining the vesting outcome, taking into account a number of factors as
detailed on page 67.
The Committee expects the performance measures and weightings to
be unchanged (40% EPS, 40% NCF and 20% relative TSR); full details
of award levels and performance targets will be disclosed when the
awards are granted. In line with our current policy, the Company would
consult with shareholders on any significant proposed changes to
performance measures.
Committee focus for 2020/21
The Committee will continue to monitor the operation of the policy, in
particular performance metrics for our short-term and long-term incentive
schemes, to ensure they remain aligned with our strategy for our retained
business, particularly in the context of the continuing global pandemic, 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.
Shareholder engagement
The Committee welcomes ongoing shareholder dialogue and takes an
active interest in voting outcomes. We are pleased that the 2019 Annual
Report on Remuneration received high levels of support, with over 95% of
votes cast in favour of the resolution. We also thank our shareholders for
approving the Directors’ Remuneration Policy in 2020, with over 86% of
votes cast in favour of the resolution, but we recognise there is work still to be
done in ensuring our shareholders are satisfied that the policy is appropriate
for our Directors and aligns with our wider stakeholder interests. Ahead of the
policy vote in January 2020, we received feedback on a number of policy
matters, including pension contributions for incumbent Directors, our choice
of TSR comparator group and post-shareholding guidelines.
As detailed above, we have begun to address the pension provision for
our incumbent Directors, reducing their contributions to18% of salary for
2020/21. During the policy review in 2018/19, we considered moving our
TSR comparator group to a bespoke peer group. Given the small number
of listed companies within our sector, that has further reduced since our
policy review, we are however confident that the FTSE250 Index (excluding
Investment Trusts) remains the most appropriate comparator group. Whilst the
Group is not currently a constituent of the FTSE250, our aim is to return to that
index in due course.
Marston’s PLC Annual Report and Accounts 2020
Remuneration Summary 2019/20
/
63
Principles
• Ensure remuneration arrangements support sustainable growth and strategic objectives of the Group.
• Substantial part of the incentive package for Executive Directors is awarded 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.
Key features (current Policy)
Component
Basic salary and core Reflects scope of the role; to recruit and
retain calibre required; and reviewed in
benefits
context of wider Group
Annual bonus
Maximum 100% of salary
Implementation in 2019/20
2% increase in salary in 2020 in line with the average salary increases across
the Group
As noted in the Committee Chairman’s statement and below, each Executive
Director’s salary was voluntarily reduced in the year having regard to the impact
and circumstances of COVID-19
5% reduction in pension contributions for CEO from 25% to 20%
Other elements of benefits package unchanged
0% bonus awarded reflecting performance against targets as described on page 65
Deferred element
of bonus
Long Term Incentive
Plan (LTIP)
Share ownership
policy
Outcomes
Andrew Andrea
Ralph Findlay
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
No bonus awarded so no deferral into shares
LTIP award granted in December 2017 lapsed in full as performance targets not met
Normal maximum is 125% of salary
Awards of 125% of salary granted during the period in December 2019
Malus and clawback provisions apply for
up to two years
200% of salary for all Executive Directors
316% of salary for Ralph Findlay, CEO
123% of salary for Andrew Andrea, CFO
2020
2019
2020
2019
Fixed
Basic salary, core benefits
and pension
£445,365
£486,061
£592,423
£722,432
Variable
Annual bonus
£0
£0
£0
£0
Long-term incentives
£0
£01
£0
£01
Total
£445,365
£468,061
£592,423
£722,432
1. 11.2% of the 2016/17 LTIP maximum met the performance conditions and were due to vest. However, the Executive Directors waived their rights to this award.
How we performed against our objectives
Annual bonus for 2019/20
Performance metric
Underlying Group
profit before taxation
Link to strategy
These measures reflect the
Group’s business priorities
that underpin our strategy
during the year
Free cash flow
Bonus
Weighting
Threshold
Target
Maximum
Actual
% of salary
60%
£90.0m
£93.0m
£97.0m
£(22.0)m
40%
£120.0m
£124.0m
£130.0m
£67.0m
LTIP vesting in 2019/20 (2017/18 LTIP Award)
Performance metric
CROCCE
Free cash flow
Relative TSR
Link to strategy
These ultimately
determine the success
of the Group during
the year
Weighting
40%
40%
20%
Base
10.5%
£300m
Threshold
Base +0.25%
Base +7.5%
On-target
50% vesting
Base +0.5%
Base +15.0%
Maximum
100% vesting
Base +1.0%
Base +30.0%
–
Median
– Upper quintile
Actual
6.4%
£289.1m
Below
median
0%
0%
0%
LTIP vesting
% of max
0%
0%
0%
Marston’s PLC Annual Report and Accounts 2020Governance
64
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 3 October 2020.
Sections in the report not specifically stated as audited are not subject to audit.
Executive Directors
Single total figure of remuneration (audited)
Period ended 3 October 2020
Andrew Andrea
Ralph Findlay
Salary1
£
359,542
466,785
Benefits
£
13,915
18,271
Bonus
£
0
0
Long-term
incentives
£
0
0
Pension
£
71,908
107,367
Total
£
445,365
592,423
Total fixed
remuneration
£
445,365
592,423
Total variable
remuneration
£
0
0
1. In the reporting period during the first national lockdown, whilst the Group’s entire pub estate remained closed, those employees who were not furloughed were paid 80% of their base salary, this included Andrew Andrea and his salary
was reduced to £308,179 during the period April 2020 to July 2020. Ralph Findlay voluntarily reduced his base salary to £250,000 during the same period; a reduction of 56%. Car allowance payments and pension contributions were
reduced by 20% for the same period.
Period ended 28 September 2019
Andrew Andrea
Ralph Findlay
Salary
£
377,670
563,900
Benefits
£
14,857
17,557
Bonus
£
0
0
Long-term
incentives
£
0
0
Pension
£
75,534
140,975
Total
£
468,061
722,432
Total fixed
remuneration
£
486,061
722,432
Total variable
remuneration
£
0
0
Individual elements of remuneration (audited)
Fixed elements
Base salary, benefits and retirement benefits
Directors’ Remuneration Policy
Base salary is a core element of fixed remuneration, reflecting the individual’s role and experience. Base salary is usually reviewed annually by the
Committee and fixed for the financial year. Salary increases are reviewed in the context of salary increases across the wider Group.
Executive Directors receive benefits in line with market practice which are set at a level which the Committee considers appropriate against the market.
Executive Directors are eligible to participate in the defined contribution pension scheme and, if a member before closure of the scheme, the defined
benefit scheme. In appropriate circumstances, Executive Directors may take a salary supplement instead of contributions into a pension plan.
Name
Base salary
2019/20
£
Increase to base
salary for
2020/21
Base salary
2020/21
£
Andrew Andrea
385,223
2%
392,927
Ralph Findlay
575,178
2%
586,681
Benefits
Car allowance, private
medical insurance and
life assurance
Car allowance, private
medical insurance,
life assurance and long
service payment
Increase/
decrease to
benefits for
2020/211
Pension
2019/20
£
Increase/
decrease to
pension for
2020/212
(0.6%)
71,908
(2%)
(0.1%)
107,367
(2%)
1. The percentage increase/decrease to benefits for 2020/21 is calculated based on the change against contractual benefit awards for 2019/20.
2. Pension increase/decrease is presented as a percentage of salary.
Base salary
For 2020/21, the basic salary increase for Executive Directors is 2%, which is in line with the average salary increases across the Group.
Benefits
During the reporting period, Ralph Findlay completed 25 years’ service with the Group. It is custom and practice within the Marston’s Group to make an
annual long service award payment, based on the equivalent of one day’s basic salary entitlement, to be paid in the anniversary month when employment
commenced. All employees are eligible to receive this benefit after 25 years’ continuous service. Private medical insurance benefits are unchanged but
premiums may vary from year to year.
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.
Marston’s PLC Annual Report and Accounts 2020
65
Pension entitlements:
Whilst the current policy permits Executive Directors to 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, the Committee has given further consideration to shareholder feedback and evolving market
practice and has agreed to reduce the pension provision, for incumbent Executive Directors, over a period of time, to 7%. This being the contribution rate
available to the majority of employees who participate in the Company’s Group Personal Pension Plan (GPPP). With effect from the 2020/21 financial period,
the pension contributions for the incumbent Executive Directors will reduce by 2% to 18% of base salary. The Committee will review the contribution rate again
during the 2020/21 financial period with the intention of reducing pension provision for the existing Executive Directors to 7% no later than 2023/24.
• No contributions were made into the GPPP for the defined contribution scheme, on behalf of Andrew Andrea during the year. For the period ended
3 October 2020, Andrew Andrea received a cash supplement of 20% in lieu of pension contributions.
• Ralph Findlay was previously a member of the defined benefit scheme and has opted to no longer accrue future benefits. For the period ended 3 October
2020, Ralph Findlay received a cash supplement of 20% as a salary supplement in lieu of pension contributions.
• 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; this is currently 7% of salary.
• 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 30.09.20
£
83,624
Accrued pension
at 30.09.19
£
117,049
Normal
retirement
age
60
During the year, Ralph Findlay elected to draw his defined benefit pension before his normal retirement age, with effect from 9 April 2020. Ralph Findlay took
a tax-free cash sum of £450,000 and a reduced pension of £83,624 per year, after allowing for cash commutation and a Lifetime Allowance tax charge.
His pension before these adjustments was £109,932 per year, which allows for the adjustment due to early retirement. On his death, a spouse’s pension will
be payable equal to 60% of the member’s pre-commutation pension.
Variable elements
Annual Bonus and Deferred Bonus Plan
Directors’ Remuneration Policy
The Annual Bonus Plan rewards performance against annual targets which support the strategic direction of the Group. Compulsory deferral into shares
aligns Executive Directors with shareholder interests and provides a retention element.
The usual maximum annual bonus opportunity is 100% of base salary. At least 50% of the award is based on financial performance measures.
The balance of the bonus opportunity is based on financial measures and/or the delivery of strategic/individual objectives. Performance measures are
determined each year reflecting the business priorities that underpin Group strategy. 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. Malus and clawback provisions apply.
Any bonus earned in excess of 40% of the maximum award is usually payable in shares in the Company which will be deferred for a period of
three years.
With the exception of 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 FCF. Sales and operations
teams have additional elements within their bonus schemes linked to segmental and individual performance.
2019/20 outturn
Bonuses to Executive Directors, for the period under review, are based on performance against pre-set targets for both Group profit (60%) and FCF (40%).
As disclosed last year, the Committee reviewed the structure of the annual bonus scheme and determined that going forward (i.e. from 2019/20), up to 20% of
maximum would be payable for delivering an appropriately stretching level of threshold performance.
The targets and actual performance for 2019/20 are set out below:
2019/20
Underlying Group profit/(loss) before taxation
Free cash flow
Award
Threshold
£90.0m
£120.0m
Target
£93.0m
£124.0m
Maximum
£97.0m
£130.0m
Actual
£(22.0)m
£67.0m
% of salary
0%
0%
0%
Opportunity
60%
40%
100%
Marston’s PLC Annual Report and Accounts 2020Governance
66
Annual Report on Remuneration continued
2020/21 opportunity
The bonus opportunity for the annual bonus scheme for 2020/21 remains at 100% of salary. To reflect the uncertainty surrounding the impact of COVID-19 on
current trading conditions, the current pay-out at threshold at 20% will be retained but on-target performance will result in a 40% pay-out, instead of the normal
50% pay-out.
As disclosed in the Annual Statement on pages 60 to 62, the performance measures for the annual bonus have been aligned to the Group’s revised strategy
and strategic pillars as shown in the table below.
Strategic pillar
We will Grow
We are Guest Obsessed
We Raise the Bar
Performance measure
Profit before tax (financial)
Free cash flow (financial)
Successful implementation of the transition period for the Carlsberg joint venture (strategic)
Guest satisfaction scores (strategic)
Cost reduction programme (financial)
% weighting for 2020/21
25%
30%
25%
10%
10%
The Directors consider that the annual bonus targets for 2020/21 financial year 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 pay-out delivered relates to performance against the targets on a retrospective basis.
Given the continuing uncertainty and the possibility of further national and local lockdowns, it is currently challenging to set targets for performance measures.
The Committee will keep these under review and finalise them as soon as possible, with details provided in the 2021 Annual Report and Accounts. When the
Committee sets the targets, and assesses performance against these targets in the following year, it will exercise its judgement in the round to ensure that awards
are appropriate in the context of all relevant factors.
Any bonus earned in excess of 40% of maximum will be deferred into shares for a period of three years.
Long Term Incentive Plan
Directors’ Remuneration Policy
The Long Term Incentive Plan (LTIP) incentivises Executive Directors to deliver against the Group’s strategy over the longer term. Long-term performance
targets and share-based remuneration support the creation of sustainable shareholder value.
Awards vest dependent on the achievement of performance targets, normally over a three-year performance period. The normal maximum awards size
will be up to 150% of base salary in respect of any financial year. 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 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. Malus and clawback provisions apply.
At its discretion, the Committee may award dividend equivalents to reflect dividends that would have been paid on vested awards under the LTIP from the
end of the performance period until the date of release.
Vesting in respect of performance during 2019/20 (2017/18 LTIP award)
LTIP awards granted in 2017/18 were subject to the achievement of the metrics in the following table. Whilst the formal vesting date is in December 2020, the
three-year performance period ended on 3 October 2020 and the Committee have reviewed the outturn for each measure. Each of the three performance
measures, CROCCE, FCF and relative TSR, failed to meet threshold performance. Therefore, the award lapsed in full.
CROCCE
FCF
Relative TSR
Weighting
40%
40%
20%
Base
10.5%
£300m
–
Threshold
at 25%
Base +0.25%
Base +7.5%
Median
On-target
50% vesting
Base +0.5%
Base +15%
–
Maximum
100% vesting
Base +1.0%
Base +30%
Upper quintile
Actual
6.4%
£289.1m
Below median
Vesting
% of max
0%
0%
0%
• CROCCE removes any potential distortions from subjective decisions on depreciation policy and asset revaluation.
• FCF is set as a three-year cumulative amount.
• 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 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.
Marston’s PLC Annual Report and Accounts 2020
67
Granted during 2019/20
LTIP awards granted in December 2019 were as follows:
2019/20
Andrew Andrea
Ralph Findlay
Percentage of
salary
125%
125%
Number of shares
372,124
555,620
Face value
at grant1
£481,528
£718,972
% of award
vesting at threshold
25%
25%
Performance period
Holding period
Financial periods
2019/20–2021/22
Financial periods
2022/23–2023/24
1. Calculated using the mid-market share price at date of grant of £1.294.
As reported in the 2019 Annual Statement, changes were made to the performance measures for the LTIP. The detailed performance metrics and targets that
apply to the 2019/20 LTIP award are shown below.
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
Straight-line vesting applies between threshold, on-target and maximum performance.
1. During the performance period the implementation of IFRS 16 ‘Leases’ will have an impact, hence EPS targets are lower than the 2019 year figure.
2020/21 awards
The Committee intends to grant awards under the LTIP in 2020/21 at the level of 125% of salary. Awards would normally be made annually in December.
However, in light of the current economic conditions, and as a result of the global pandemic, setting appropriate targets is challenging. The Committee has
agreed to monitor trading conditions together with share price performance over the coming months and delay the grant of options until later in the financial
period. The Committee has discretion to amend the vesting outcome where it considers that the formulaic outcome is inappropriate. In particular, the Committee
will consider whether there has been any ‘windfall gain’ when determining the vesting outcome, taking into account a number of factors, including:
• Share price performance over the vesting period on an absolute basis and relative basis against peer companies.
• Underlying financial performance of the Group during the performance period.
• The impact of the COVID-19 pandemic and any other significant events during the vesting period on the Group’s share price or the market as a whole.
The Committee expects the award to be made in the period following the interim results announcement. Whilst the Committee expects the performance
measures and weightings to be unchanged (40% EPS, 40% NCF and 20% relative TSR), full details will be disclosed in the regulatory news announcement that
will be made following the grant of options. In line with our current policy, the Company would consult with shareholders on any significant proposed changes
to performance measures.
Non-executive Directors
Directors’ Remuneration Policy
Non-executive Directors’ fees are usually reviewed every two years and are set at a level that reflects market conditions and is sufficient to attract
individuals with appropriate knowledge and experience. Fees are based on the level of fees paid to Non-executive Directors serving on Boards of
similar sized UK listed companies and the time commitment and contribution expected for the role. Non-executive Directors receive a basic fee and an
additional fee for further duties (for example, chairmanship of a Committee or Senior Independent Director responsibilities or holding the position of Non-
executive Director responsible for employee engagement).
Total remuneration (Chairman and Non-executive Directors) (audited)
Carolyn Bradley
Bridget Lea
Octavia Morley2
Matthew Roberts
William Rucker
Past Directors
Catherine Glickman3
Base Fee1
£
50,400
50,400
36,900
50,400
166,667
Committee
Chairman
£
–
–
4,663
7,000
–
SID
£
7,000
–
–
–
–
2019/20 Total
£
57,400
50,400
41,563
57,400
166,667
2018/19 Total
£
61,500
4,500
–
61,500
200,000
17,049
2,337
–
19,386
61,500
1. In the reporting period during the national lockdown, whilst the Group’s entire pub estate remained closed, those employees who were not furloughed were paid 80% of their base salary. The Non-executive Directors volunteered to reduce
their base fee to 80% during the period from April 2020 to July 2020 (to £50,400). The Chairman voluntarily reduced his base fee by 50% for the same period (to £166,667).
2. Octavia Morley was appointed as a Non-executive Director on 1 January 2020, the 2019/20 figures in the table above reflect her remuneration from the date of her appointment.
3. Catherine Glickman stepped down from the Board on 24 January 2020.
Marston’s PLC Annual Report and Accounts 2020Governance
68
Annual Report on Remuneration continued
Fees
The Chairman and other Non-executive Directors fees were last reviewed in 2017/18. The Chairman’s fee and Non-executive Director fees were reviewed by
the Committee and the Board respectively in October 2020. It was agreed that an increase to fees was not appropriate for 2020/21. The Board will review
Non-executive Director fees, and the Committee will review the Chairman’s fees, in October 2021.
Chairman’s fee
Non-executive Director basic fee
Additional fee for:
Chairmanship of the Audit Committee
Chairmanship of the Remuneration Committee
Senior Independent Director
£200,000
£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
Bridget Lea
Octavia Morley1
Matthew Roberts
William Rucker
Catherine Glickman2
As at 03.10.20
(or, if earlier, date
of resignation)
25,000
25,000
25,000
25,000
200,000
50,000
As at 28.09.19
(or, if later, date of
appointment)
25,000
–
–
25,000
100,000
50,000
1. Octavia Morley was appointed as a Non-executive Director on 1 January 2020.
2. Catherine Glickman stepped down from the Board on 24 January 2020. Her interests in ordinary shares are shown as at that date.
Payments to past Directors and payment for loss of office (audited)
No payments were made to past Directors and no payments for loss of office were made during the period.
Total shareholder return chart and CEO remuneration
This graph shows the value, at 3 October 2020, of £100 invested in the Company on 2 October 2010 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
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
3 October
2020
Marston’s PLC Annual Report and Accounts 2020
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.
69
2019/20
2018/19
2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
2010/11
Total
remuneration
£
592,423
722,432
807,665
803,303
1,008,320
876,788
1,121,294
937,312
815,690
974,784
Annual
bonus
(% of maximum)
0%
0%
17.7%
20%
40%
40%
25%
0%
40%
46%
LTIP
vesting
(% of maximum)
0%
0%1
0%
0%
21%
0%
41.9%
44.2%
0%
0%
1. The performance conditions were achieved at a level such that 11.2% of the 2016/17 LTIP would have vested. However, the Executive Directors waived their rights to this award.
Change in remuneration of Directors and employee pay
The table below shows how each Director’s remuneration has changed between the periods ended 3 October 2020 and 28 September 2019. This is then
compared to the wider workforce. It was agreed that all employees of the Group should be included in the comparison. Marston’s PLC does not have any
direct employees as all employees within the Group are employed by a wholly owned subsidiary company, Marston’s Trading Limited.
Basic salary1
Annual bonus
Executive Directors
Basic salary was increased by 2% with effect
from 1 October 2019.
No bonus earned in 2019/20 or prior period. N/A
Non-executive Directors
No changes to fees
during the period.
Taxable benefits2
No changes to benefit policy.
N/A
Andrew Andrea’s benefits decreased by 6.3%
and Ralph Findlay’s benefits increased by 4.1%,
reflecting receipt of his long service award
during the reporting period.
Premiums for private medical insurance
premiums may vary from year to year.
Wider workforce
Average employee change to salary (calculated by reference to
the mean of employee pay) is 6.4%.
No bonuses were payable in respect of 2019/20, or the prior
period, based on Group performance. However, bonuses and
other discretionary payments have been earned by a number of
employees to recognise individual contributions in respect of first
half-year performance, business continuity through the COVID-19
crisis and, support for the completion of the Carlsberg joint
venture deal. Further details are set out in the Annual Statement
on pages 59–60. A small number of sales employees, within the
wider workforce, received bonuses in the prior period.
No changes to benefit policy.
Premiums for private medical insurance premiums may vary from
year to year.
1. During the period of the first UK lockdown from March until July 2020, whilst 93% of the Group’s workforce was furloughed under the Government’s CJRS, those employees who continued to work to support the business were asked to
accept a 20% voluntary reduction in their salary during the period from April to July 2020, with normal salaries paid from August 2020. The CFO and the Non-executive Directors also volunteered to accept the same 20% reduction in their
respective salary and fees. The Chairman volunteered a 50% reduction in his fees and the CEO volunteered a 56% reduction in salary over the same period.
The majority of pub-based employees have their remuneration rate set by statute rather than the market.
2. The car allowance element of the benefits policy was subject to the 20% voluntary reduction during the period from April to July 2020. Eligibility to receive the individual benefits under the policy may be determined by an employee’s role or
length of service, where applicable.
CEO pay ratio
This is the first year in which we are required to disclose the ratio of our CEO’s pay to the full-time equivalent remuneration of our UK employees whose
remuneration was ranked at the 25th percentile, median (50th percentile) and 75th percentile.
The table below shows how the CEO’s single total figure of remuneration compares with the equivalent figures for UK employees.
Year
2019/20 (reflecting voluntary reduction in salary and benefits)
2019/20 (based on contractual salary and benefits)
Method
Option B
Option B
25th percentile
pay ratio Median pay ratio
37:1
45:1
40:1
48:1
75th percentile
pay ratio
34:1
41:1
We have chosen Option B which uses the hourly rate data from the most recent Gender Pay Gap reporting. This represents the most efficient and robust
method to determine the respective pay ratios. To ensure year-on-year methodology and reporting is consistent, we have removed any variances in the total
remuneration package for employees sitting at each of the percentiles as, for example, not all employees contribute to a pension scheme or receive a bonus.
The Company considers the median pay ratio is consistent with the Group’s wider policies on employee pay, reward and progression. In order to determine
the full-time equivalent salary component for the representative employees, the hourly rate was multiplied by 35 hours to calculate the full-time equivalent
salary. The calculations for the relevant representative employees were performed as at 5 April 2020. Sensitivity analysis was performed around the 25th,
median and 75th percentile employees to ensure that they were reasonably representative.
Marston’s PLC Annual Report and Accounts 2020Governance
70
Annual Report on Remuneration continued
The table below shows the UK employee percentile pay and benefits used to determine the above pay ratios and the salary component for each figure.
The CEO remuneration is the single figure of total remuneration for the year ended 3 October 2020 as disclosed on page 64, therefore reflecting Ralph
Findlay’s voluntary reduction in salary and benefits during the period from April to July 2020. We have also included, in the table on the previous page, the
pay ratio based on Ralph Findlay’s contractual salary and benefits for 2019/20. A substantial proportion of the CEO’s total remuneration is performance-
related and delivered in shares. The ratios will therefore depend significantly on the CEO’s annual bonus and long-term incentive outcomes, and may fluctuate
year-on-year.
Component
Base salary
Total remuneration
CEO
£
466,785
592,423
25th percentile
£
14,924
14,924
50th percentile
£
15,870
15,870
75th percentile
£
17,290
17,290
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 payments1
Total employee pay2
1. No distributions by way of share buybacks were made to shareholders during the 2019/20 financial year.
2. Excluding non-underlying items.
2019/20
£30.4m
£229.5m
2018/19
£47.5m
£237.7m
% change
(36%)
(3.5%)
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 the Senior Independent Director of Vistry Group PLC and during the year he received fees of £70,372. Andrew Andrea is a Non-executive
Director of Portmeirion Group Plc and during the year he received fees of £35,313.
Shareholder voting
The following table sets out actual voting outcomes in respect of the Directors’ Remuneration Policy resolution and the Annual Report on Remuneration resolution
at the Annual General Meeting (AGM) held on 24 January 2020.
Approval of the Directors’ Remuneration Policy
Approval of the Annual Report on Remuneration
Votes for
89,792,873
100,094,860
% of vote
86.05%
95.92%
Votes against
14,551,016
4,253,359
% of vote
13.95%
4.08%
Votes withheld
131,691
127,364
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 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).
Post-employment shareholding requirement
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 (for current Executive Directors, two times salary). 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 current Executive Directors, one times salary). For these purposes, ‘relevant shares’ exclude any shares purchased by the Executive
Director or acquired as a result of a share plan award granted in respect of a financial year before 2019/20.
Directors’ share interests (audited)
As at 3 October 2020, 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 3 October 2020
Andrew Andrea
Ralph Findlay
Shares owned outright
Share options
At 03.10.20
332,773
1,290,475
At 28.09.19
332,773
1,290,475
Not subject to
performance
0
20,224
Subject to
performance
1,227,657
1,833,022
Target % of
200%
200%
Actual % of
salary holding
123%
316%
In assessing the extent to which the guidelines are satisfied, shares are valued at the end of the relevant financial year. Once the required holding has been
achieved, any change in the share price is disregarded when assessing the value attributed to shares already held.
Marston’s PLC Annual Report and Accounts 2020
71
Executive Directors’ interests in share options as at 3 October 2020
Grant date
Brought forward
29.09.19
Granted
Exercised/
vested
Cancelled/
lapsed
Carried forward
03.10.20
Exercise price £
Vesting date
Release date
Andrew
Andrea
LTIP
Ralph
Findlay
SAYE
LTIP
20171
20183
20194
2018
20171
20183
20194
382,5002
473,033
–
20,224
571,1152
706,287
–
–
372,124
–
–
–
555,620
–
–
–
–
–
–
–
–
–
–
–
–
–
–
382,500
473,033
372,124
20,224
571,115
706,287
555,620
0.89
2020
2021
2022
2021
2020
2021
2022
2022
2023
2024
–
2022
2023
2024
1. The performance conditions applying to the 2017/18 LTIP are set out on pages 66.
2. 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.
3. The performance conditions applying to the 2018/19 LTIP are set out on page 67 of the 2019 Directors’ Remuneration Report.
4. The performance conditions applying to the 2019/20 LTIP are set out on pages 67.
There have been no changes to the Directors’ share interests and interests in share options between 3 October 2020 and 8 December 2020 (being the latest
practical date prior to the date of this report).
Service contracts
Executive Directors’ contracts are on a rolling 12-month basis and are subject to 12 months notice when terminated by the Group 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 a letter of appointments, and their appointment and subsequent re-
appointment is subject to annual approval by shareholders.
Name
Andrew Andrea
Ralph Findlay
William Rucker
Carolyn Bradley
Octavia Morley
Bridget Lea
Matthew Roberts
Commencement date
31 March 2009
15 August 2001
1 October 2018
1 October 2014
1 January 2020
1 September 2019
1 March 2017
Unexpired term remaining as at 3 October 2020
Terminable on 12 months’ notice
Terminable on 12 months’ notice
Fixed term expiring on 30 September 2021 (subject to renewal) and terminable on six months’ notice
Fixed term expiring on 30 September 2021 (subject to renewal) and terminable on one month’s notice
Fixed term expiring on 31 December 2022 (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 28 February 2023 (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.
This report was approved by the Board and signed on its behalf by
Octavia Morley
Chairman of the Remuneration Committee
10 December 2020
Marston’s PLC Annual Report and Accounts 2020Governance
72
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 8, to the Statement of Directors’ Responsibilities on page 74, constitutes
the Directors’ Report in accordance with the Companies Act 2006.
Strategic Report
The Company is required by the Companies Act to include a Strategic
Report in this document. The information that fulfils the requirements of the
Strategic Report can be found on pages 2 to 43, which is incorporated in
this report by reference.
Corporate Governance Statement
The Corporate Governance Statement, as required by the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules (DTR) 7.2.1, is set
out on page 45 and is incorporated into this report by reference.
Dividends
As announced in May 2020, due to the global pandemic, the Board
believes it is prudent to plan for no dividends for financial year 2020,
therefore no dividends were or will be paid. Future dividends will be
reviewed when normalised trading resumes.
Directors
Biographies of the Directors currently serving on the Board are set out on
pages 46 and 47. Changes to the Board during the period are set out in
the Corporate Governance Report starting on page 45. Details of Directors’
service contracts are set out in the Directors’ Remuneration Report on page
71 and their shareholdings are set out on pages 69 and 71.
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. In accordance with the
requirements of the UK Corporate Governance Code, all Directors will offer
themselves for re-election at the AGM on 27 January 2021.
Directors’ shareholdings
The interests of Directors and their connected persons in the shares
of the Company are set out on pages 69 and 71 of the Directors’
Remuneration Report.
Directors’ indemnities and insurance
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 3 October 2020 and as at the date of the
report. There are no indemnities in place for the benefit of the Auditor.
Directors’ powers
Under the Articles of Association, the Directors have authority to allot
ordinary shares subject to the aggregate set at the 2020 Annual General
Meeting (AGM). The Company was also given authority at its 2020 AGM
to make market purchases of ordinary shares up to a maximum number of
63,402,958 shares. Similar authority will again be sought from shareholders
at the 2021 AGM. The powers of the Directors are further described in the
Corporate Governance Report on pages 45 to 55.
Share capital and shareholder voting rights
Details of the Company’s issued share capital and of the movements during
the period are shown in note 29 to the financial statements on page 124.
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 29 to the financial
statements on pages 124. 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.
Significant shareholders
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
3 October 2020 and 8 December 2020 (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 3 October
2020
Voting rights
9,339,455
9,291,379
9,228,860
8,392,337
% of
voting rights
4.98%
4.97%
4.93%
4.94%
Nature of
interest
Indirect
Indirect
Indirect
Indirect
6,794,023
3.99%
Direct
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
Canaccord Nominees Limited
% of
preference
share voting rights
42.06%
13.88%
7.33%
5.81%
3.81%
3.74%
3.67%
3.67%
3.33%
Number
31,548
10,407
5,500
4,356
2,855
2,805
2,750
2,750
2,500
Marston’s PLC Annual Report and Accounts 2020
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.
Employee information
The average number of employees within the Group is shown in note 5 to
the financial statements on page 100.
Marston’s is a responsible employer committed to building a diverse culture
where our teams and guests feel welcome, supported and included for who
they are. We aim to ensure this commitment is reflected in how we attract
talent, how we nurture and develop people internally, and how we ensure
our guests have the best experience. We do not discriminate in any way,
ensuring that training, career development and promotion opportunities are
available to all employees irrespective of gender, race, age or disability.
We are committed to keeping employees up to date on business
performance and our strategy, helping them to understand the part they
can play in building a successful business. This ensures our people are
both engaged and enabled, having both the desire and the ability to
make a difference. We do this in a variety of ways through centralised
communications, as well as leader and manager-led engagement.
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 and more details can be found on
page 38.
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. We provide an ongoing review of key
sector trends to customers and stakeholders as well as recommendations to
grow beer sales.
Greenhouse gas emissions, energy consumption and
energy efficient action
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 as saving
expenditure on energy and utilities. More details on how we are reducing
our environmental impact can be found on page 40 in our Strategic Report.
73
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 116 to 122.
Auditor
KPMG LLP have indicated their willingness to continue as Auditor and their
re-appointment has been approved by the Audit Committee. Resolutions to
re-appoint them and to authorise the Audit Committee to determine their
remuneration will be proposed at the 2021 AGM.
Going concern
The Group’s business activities, together with the factors likely to affect its
future development, performance and position are set out in the Strategic
Report. The financial position of the Group is described on pages 18 to
20. In addition, note 25 to the financial statements on pages 116 to 122
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 impact of COVID-19 has necessitated greater focus and scrutiny of
the current and projected financial position of the Group. This includes the
modelling of various scenarios to test the resilience of the business to the
ongoing impact of COVID-19. Further details are set out in note 1 to the
financial statements on page 90. The Directors are satisfied that the Group
has sufficient liquidity to withstand the downside scenarios and therefore
adequate resources to continue in operational existence for the foreseeable
future. The Group continues to have regular dialogue with its financiers and it
is possible that further covenant amendments may be required. Whilst there is
no certainty that these amendments will be granted (this has been disclosed
as a material uncertainty in the financial statements), given our experiences
to date the Directors are confident of securing these where necessary.
Accordingly, the financial statements set out on pages 84 to13 and
132 to 144 have been prepared on the going concern basis.
Annual General Meeting
The AGM of the Company will be held at on 27 January 2021 at Marston’s
Talent Academy, Summerfield Road, Wolverhampton WV1 4PR. In light of
COVID-19 and the current restrictions in place, this year’s AGM is planned
to be held as a closed meeting. Whilst not being permitted to attend in
person, shareholders are encouraged to submit their proxy voting instructions
and any questions in advance of the meeting. Further details can be found
in the notice convening the meeting. The notice, 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
10 December 2020
Company registration number: 31461
Marston’s PLC Annual Report and Accounts 2020Governance
74
Statement of Directors’ Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group
and parent Company financial statements in accordance with applicable
law and regulations.
Responsibility statement of the Directors
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
• the Strategic Report/Directors’ Report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties
that they face.
We consider 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’s position and performance, business
model and strategy.
Disclosure of information to Auditor
The Directors who held office at the date of approval of this Directors’
Report confirm that, so far as they are each aware, there is no relevant audit
information of which the Company’s Auditor is unaware; and each Director
has taken all the steps that they ought to have taken as a Director to make
themself aware of any relevant audit information and to establish that the
Company’s Auditor is aware of that information.
Ralph Findlay
Chief Executive Officer
10 December 2020
Andrew Andrea
Chief Financial and
Corporate Development Officer
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that law they
are required to prepare the Group financial statements in accordance with
International Financial Reporting Standards as adopted by the European
Union (IFRS as adopted by the EU) and applicable law and have elected
to prepare the parent Company financial statements in accordance with UK
accounting standards, including FRS 102 ‘The Financial Reporting Standard
applicable in the UK and Republic of Ireland’.
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 parent Company and of their profit or loss for that
period. In preparing each of the Group and parent Company financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant, reliable
and prudent;
• for the Group financial statements, state whether they have been prepared
in accordance with IFRS as adopted by the EU;
• for the parent Company financial statements, state whether applicable
UK accounting standards have been followed, subject to any
material departures disclosed and explained in the parent Company
financial statements;
• assess the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern;
• and use the going concern basis of accounting unless they either intend
to liquidate the Group or the parent Company or to cease operations,
or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the parent Company’s transactions
and disclose with reasonable accuracy at any time the financial position of
the parent Company and enable them to ensure that its financial statements
comply with the Companies Act 2006. They are 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, and have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible
for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that complies with that law
and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Marston’s PLC Annual Report and Accounts 2020
Marston s PLC Annual Report and Accounts 2020
’
75
Financial
Statements
Independent Auditor’s Report
Group Accounts
Notes to the Group Accounts
Company Accounts
Notes to the Company Accounts
76
84
89
132
134
76
Independent Auditor’s report to the members
of Marston’s PLC
Independent Auditor’s report to the members of Marston’s PLC
1. Our opinion is unmodified
We were first appointed as auditor by the shareholders on 24 January
2020. The period of total uninterrupted engagement is for the one financial
year ended 3 October 2020. We have fulfilled our ethical responsibilities
under, and we remain independent of the Group in accordance with, UK
ethical requirements including the FRC Ethical Standard as applied to listed
public interest entities. No non-audit services prohibited by that standard
were provided.
Overview
Materiality: Group
financial statements
as a whole
Coverage
Key audit matters
Recurring risks
Event driven
£10 million
0.4% of Group total assets
100% of Group total assets
vs 2019
p
he estate
derivative financial instruments p
p
Valuation of t
Valuation of
Going concern
The impact of uncertainties due to the UK
exiting the European Union on our audit
Carrying amount of goodwill in relation to
the Pubs and Bars cash generating unit
tu
p
We have audited the financial statements of Marston’s PLC (“the Company”)
for the 53 week period ended 3 October 2020 which comprise the Group
Income Statement, Group Statement of Comprehensive Income, Group
Cash Flow Statement, Group Balance Sheet, Group Statement of Changes
in Equity, Company Balance Sheet, Company Statement of Changes in
Equity and the related notes, including the accounting policies in note 1 to
both the Group and parent Company financial statements.
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s
and of the parent Company’s affairs as at 3 October 2020 and of the
Group’s loss for the period then ended;
• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as adopted
by the European Union;
• the parent Company financial statements have been properly prepared
in accordance with UK accounting standards, including FRS 102 The
Financial Reporting Standard applicable in the UK and Republic of
Ireland; 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.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the Audit Committee.
Marston’s PLC Annual Report and Accounts 2020
2. Material uncertainty related to going concern
The risk
Disclosure quality
There is judgement involved in the Directors’ conclusion
that risks and circumstances described in note 1 to the
financial statements represent a material uncertainty
over the ability of the Group and the parent Company
to continue as a going concern for a period of
at least a year from the date of approval of the
financial statements.
Clear and full disclosure of the facts and the Directors’
rationale for the use of the going concern basis of
preparation, including that there is a related material
uncertainty, is a key financial statement disclosure and
so was the focus of our audit in this area. Auditing
standards require that to be reported as a key
audit matter
Going Concern
We draw attention to note 1 to
the financial statements which
indicates that the Group’s and
the parent Company’s ability to
continue as a going concern
is dependent on the ability to
achieve further covenant waivers
and amendments if required.
These events and conditions,
along with the other matters
explained in note 1, constitute
a material uncertainty that
may cast significant doubt on
the Group’s and the parent
Company’s ability to continue as
a going concern.
Our opinion is not modified in
respect of this matter.
77
Our response
Our procedures included:
Assessing transparency:
We assessed the completeness and accuracy of the matters
covered in the going concern disclosure by:
• Evaluating how the Group’s risk assessment process identifies
business risks relating to events and conditions that may cast
significant doubt on the ability of the Group and of the parent
Company to continue as a going concern;
• Evaluating the cash flow forecast models the Group used in its
assessment and evaluating how the information system captures
events and conditions that may cast significant doubt on ability
to continue as a going concern;
• Evaluating whether the Group’s assessment has failed to identify
all the events or conditions that may cast significant doubt on
going concern and whether the method used by the Group
is appropriate;
• Assessing the reasonableness of the Group’s budgets/forecasts
and evaluating whether key assumptions used in its forecasts
are within a reasonable range, and assessing the plausible but
severe downside scenarios particularly whether those downside
scenarios reflect plausible impacts of COVID-19 on the business;
• Evaluating whether sufficient and appropriate audit evidence
has been obtained to conclude whether a material uncertainty
exists and the appropriateness of the Directors’ use (or
otherwise) of the going concern basis of accounting;
• Evaluating whether there is adequate support for the assumptions
underlying the Directors’ assessment, including mitigations,
whether they are realistic and achievable and consistent with the
external and/or internal environment and other matters identified
in the audit;
• Assessing the forecast cash position and the available committed
facilities to understand the financial resources available to the
Group during the forecast period; and
• Evaluating the Directors’ assessment of the Group’s ability to
comply with its covenants during the forecast period.
Our results
• We found the disclosure of the material uncertainty to
be acceptable.
We are required to report to you if the Directors’ going concern statement under the Listing Rules set out on page 73 is materially inconsistent with our audit
knowledge. We have nothing to report in this respect.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
78
Independent Auditor’s report to the members
of Marston’s PLC continued
3. Other key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most
significant assessed risks of material misstatement (whether or not due to fraud) identified by us, 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. Going concern is a significant key audit matter and is described
in section 2 of our report. We summarise below the other key audit matters in arriving at our audit opinion above, together with our key audit procedures to address
those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures
undertaken, in the context of, and solely for the purpose of,our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently
are incidental to that opinion, and we do not provide a separate opinion on these matters.
The impact of uncertainties due
to the UK exiting the European
Union on our audit
Refer to page 26 (principal risks)
The risk
Unprecedented levels of uncertainty
All audits assess and challenge the reasonableness
of estimates, in particular as described in the
valuation of the estate and the carrying amount
of goodwill in relation to the Pubs and Bars cash
generating unit below, and related disclosures and
the appropriateness of the going concern basis of
preparation of the financial statements (see above).
All of these depend on assessments of the future
economic environment and the Group’s future
prospects and performance.
In addition, we are required to consider the other
information presented in the Annual Report and
Accounts including the principal risks disclosure and
the Viability Statement and to consider the Directors’
statement 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’s position and performance, business
model and strategy.
Brexit is one of the most significant economic events
for the UK and its effects are subject to unprecedented
levels of uncertainty of consequences, with the full
range of possible effects unknown.
Our response
We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in planning and
performing our audits. Our procedures included:
• Our Brexit knowledge: We considered the Directors’
assessment of Brexit-related sources of risk for the Group’s
business and financial resources compared with our own
understanding of the risks. We considered the Directors’ plans to
take action to mitigate the risks;
• Sensitivity analysis: When addressing the valuation of the
estate and the carrying amount of goodwill in relation to the
pubs and bars cash generating unit and other areas that depend
on forecasts, we compared the Directors’ analysis to our
assessment of the full range of reasonably possible scenarios
resulting from Brexit uncertainty and, where forecast cash flows
are required to be discounted, considered adjustments to
discount rates for the level of remaining uncertainty; and
• Assessing transparency: As well as assessing individual
disclosures as part of our procedures on the valuation of the
estate and the carrying amount of goodwill in relation to the
Pubs and Bars cash generating unit, we considered all of the
Brexit related disclosures together, including those in the strategic
report, comparing the overall picture against our understanding
of the risks.
Our results
• As reported under the valuation of the estate and the carrying
amount of goodwill in relation to the Pubs and Bars cash
generating unit, we found the resulting estimates and related
disclosures of estimation uncertainty and disclosures in relation
to going concern to be acceptable. However, no audit should
be expected to predict the unknowable factors or all possible
future implications for a company and this is particularly the case
in relation to Brexit.
Marston’s PLC Annual Report and Accounts 2020
79
3. Other key audit matters: including our assessment of risks of material misstatement (continued)
Valuation of the estate
(Group –£1,625.5 million;
2019: £2,003.6 million
Revaluation: £243.9 million;
2019: £59.0 million)
(Parent Company
– £266.1 million;
2019: 320.6 million
Revaluation: £47.3 million;
2019: £10.3 million)
Group –Refer to page 58
(Audit Committee Report), page
92 (accounting policy) and
note 12 on pages 106 to 108
(financial disclosures).
Parent Company –Refer to page
58 (Audit Committee Report),
page 135 (accounting policy)
and note 5 on pages 137 to 138
(financial disclosures).
The risk
Subjective valuation
Our response
Our procedures included:
The valuation of the Group’s and the parent
Company’s estate, specifically the freehold land &
buildings and ‘effective freehold’ leasehold properties
held at fair value is a key area of estimation.
• Assessing valuation approach: We critically assessed
the Directors’ valuation and methodology used to check
whether it was performed in accordance with the relevant
accounting standards;
The valuation involves the determination of estimates,
most notably the fair maintainable trade (FMT) and
applicable trading multiples.
These estimations are inherently subjective and small
changes in the assumptions used to value the Group’s
and the parent Company’s estate could have a
significant effect on the financial position of the Group
and the parent Company.
The effect of these matters is that, as part of our risk
assessment, we determined that the valuation of the
estate has a high degree of estimation uncertainty,
with a potential range of reasonable outcomes many
times greater than our materiality for the financial
statements as a whole. The financial statements (note
12) disclose the sensitivity estimated by the Group.
• Assessing triggers for impairment: We assessed
the appropriateness and completeness of impairment
triggers identified;
• Benchmarking assumptions: We challenged the key
assumptions, being the FMT and applicable trading multiples,
for a sample of properties by making a comparison to market
comparable data;
• Independent reperformance: We re-performed estate
valuations with our own models, with assistance from our own
KPMG valuation specialists;
• Assessing inputs: We checked observable inputs used for a
sample of assets in the valuation to source documentation;
• Assessing outputs: We evaluated the output of the valuations
and considered whether a material uncertainty exists due to the
COVID-19 pandemic; and
• Assessing disclosures: We critically assessed the adequacy of
the Group’s disclosures in relation to the valuation of the estate.
Our results
• We found the valuation of the estate to be acceptable.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
80
Independent Auditor’s report to the members
of Marston’s PLC continued
3. Other key audit matters: including our assessment of risks of material misstatement (continued)
Carrying amount of goodwill
in relation to the Pubs and Bars
cash generating unit
(Carrying value: £nil;
2019: £200.6 million
Impairment: £200.6 million;
2019: £nil million)
Refer to page 58 (Audit
Committee Report), page
91 (accounting policy)
and note 10 on page104
(financial disclosures).
Valuation of derivative
financial instruments
(£224.4 million;
2019: £235.5 million)
Refer to page 58 (Audit
Committee Report), page
94 (accounting policy) and
note 25 on pages 116 to 122
(financial disclosures).
The risk
Subjective estimate
Our response
Our procedures included:
The recoverability of goodwill and other assets in the
Pubs and Bars cash generating unit (CGU) is assessed
using forecast financial information within a discounted
cash flow model (“the model”).
Whilst there has historically been significant headroom,
there are inherent uncertainties involved in forecasting
and discounting future cash flows which have been
heightened in the wake of COVID-19.
Relatively small changes in the key assumptions
used in the model give rise to material changes in
the assessment of the carrying value of the assets in
relation to this CGU and therefore the amount of the
impairment loss to recognise.
The effect of these matters is that, as part of our risk
assessment, we determined that the value in use of
the assets in relation to this CGU have a high degree
of estimation uncertainty, with a potential range of
reasonable outcomes many times greater than our
materiality for the financial statements as a whole.
Subjective estimate
The Group uses interest rate swaps to manage
exposure to interest rate risk. The valuation of these
instruments is subjective and requires significant
estimation, particularly in relation to the determination
of the credit risk adjustment.
The level 2 fair value of these interest rate swaps is
also volatile and small changes in the inputs used for
the valuation, notably the discount rate and credit
risk adjustment, could have a significant effect on the
amounts recorded for these financial instruments.
The effect of these matters is that, as part of our risk
assessment, we determined that the valuation of
financial instruments has a high degree of estimation
uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial
statements as a whole.
• Benchmarking assumptions: We compared the Group’s
assumptions to externally derived data in relation to projected
growth and discount rates used in the model;
• Our sector experience: We evaluated the appropriateness of
underlying assumptions in determining the cash flows used in the
model including considering the appropriateness of the growth
assumption applied and challenging the Group where future
cash flows do not reflect known or probable changes in the
business environment;
• We challenged, assisted by our own KPMG valuation
specialists, the key inputs used in the calculation of the discount
rate used in the model by comparing it against external data
sources and comparator group data;
• Sensitivity analysis: We performed our own sensitivity analysis
on the assumptions noted above; and
• Assessing transparency: We assessed the Group’s disclosures
in relation to the key assumptions in determining the valuation of
goodwill in relation to the Pubs and Bars CGU.
Our results
• We found the carrying amount of goodwill in relation to the Pubs
and Bars CGU to be acceptable.
Our procedures included:
• Third party confirmations: We obtained third party
confirmations for the market value of the interest rate swaps;
• Specialist valuation assessments: We independently checked
the value of the interest rate swaps, utilising our own KPMG
valuation specialists, including the valuation of the credit risk
adjustment required; and
• Assessing disclosures: We critically assessed the adequacy
of the Group’s disclosures in relation to the valuation of
financial instruments.
Our results
• We found the valuation of derivative financial instruments to
be acceptable.
Marston’s PLC Annual Report and Accounts 2020
4. Our application of materiality and an overview
of the scope of our audit
Group total assets
£10 million
Materiality for the Group financial statements as a whole was set at
£10 million, determined with reference to a benchmark of Group total
assets of £2,531.9 million of which it represents 0.4%.
In addition, we applied materiality of £3.4 million, to specific Group
income statement items which may be of specific interest to users and that
could reasonably be expected to influence the Company’s members’
assessment of the financial performance of the Group. These items comprise
revenue, raw materials and employee costs. Materiality for these items was
determined with reference to underlying profit before tax from continuing
operations, normalised by averaging over the last four years due to volatility
in the results as a consequence of COVID-19.
Materiality for the parent Company financial statements as a whole was
set at £8.25 million, determined with reference to a benchmark of parent
Company total assets of £1,359.5 million, of which it represents 0.6%
We agreed to report to the Audit Committee any corrected or uncorrected
identified misstatements exceeding £0.4 million, in addition to other identified
misstatements that warranted reporting on qualitative grounds.
The Group team performed the audit of the Group as a single aggregated
set of financial information. The audit was performed using the materiality
levels set out above. The audit of the parent Company was also performed
by the Group team.
81
Group Materiality
£10 million
£10 million
Whole financial
statements materiality
£7.5 million
Materiality determined for designing
our procedures to respond to
aggregation risk from individually
immaterial misstatements
£0.4 million
Misstatements reported to the
audit committee
Total Assets
Group materiality
Group revenue
Group profit before tax
100%
100%
100
100
Group total assets
100%
100
Full scope for Group audit purposes 2020
Marston’s PLC Annual Report and Accounts 2020Financial Statements
82
Independent Auditor’s report to the members
of Marston’s PLC continued
5. We have nothing to report on the other
information in the Annual Report and Accounts
The Directors are responsible for the other information presented in the Annual
Report and Accounts together with the financial statements. Our opinion on the
financial statements does not cover the other information and, accordingly, we
do not express an audit opinion or, except as explicitly stated below, any form
of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether, based on our financial statements audit work, the information therein
is materially misstated or inconsistent with the financial statements or our
audit knowledge. Based solely on that work we have not identified material
misstatements in the other information.
Strategic Report and Directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the Strategic report and
the Directors’ report;
• in our opinion the information given in those reports for the financial year is
consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance with the
Companies Act 2006.
Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and
longer‑term viability
Based on the knowledge we acquired during our financial statements
audit, other than the material uncertainty related to going concern referred
to above, we have nothing further material to add or draw attention to in
relation to:
• the Directors’ confirmation within the Viability Statement (page 29) that
they have carried out a robust assessment of the emerging and principal
risks facing the Group, including those that would threaten its business
model, future performance, solvency and liquidity;
Our work is limited to assessing these matters in the context of only the
knowledge acquired during our financial statements audit. As we cannot
predict all future events or conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were reasonable at the
time they were made, the absence of anything to report on these statements
is not a guarantee as to the Group’s and the parent Company’s longer-
term viability.
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies between the knowledge we
acquired during our financial statements audit and the Directors’ statement
that they consider that the Annual report and financial statements taken
as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position and
performance, business model and strategy; or
• the section of the Annual Report and Accounts describing the work of the
Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.
We are required to report to you if the Corporate Governance Statement
does not properly disclose a departure from the provisions of the UK
Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in these respects.
6. We have nothing to report on the other matters
on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in
our opinion:
• adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not
• the Principal Risks disclosures describing these risks and explaining how
made; or
they are being managed and mitigated; and
• we have not received all the information and explanations we require for
• the Directors’ explanation in the Viability Statement of how they have
our audit.
assessed the prospects of the Group, over what period they have done so
and why they considered 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.
Under the Listing Rules we are required to review the Viability Statement.
We have nothing to report in this respect.
We have nothing to report in these respects.
Marston’s PLC Annual Report and Accounts 2020
83
7. Respective responsibilities
7. Respective responsibilities (continued)
Directors’ responsibilities
As explained more fully in their statement set out on page 74, the Directors
are responsible for: the preparation of the financial statements including
being satisfied that they give a true and fair view; 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; assessing
the Group and the parent 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 they either intend to liquidate the
Group or the parent Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
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 other irregularities (see below), or error, and to issue our opinion in
an auditor’s report. Reasonable assurance is a high level of assurance, but
does not guarantee that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists. Misstatements can
arise from fraud, other irregularities or error and are considered material if,
individually or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
Irregularities –ability to detect
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from our general
commercial and sector experience, through discussion with the Directors
and other management (as required by auditing standards), inspection of
the Group’s regulatory and legal correspondence and discussed with the
Directors and other management the policies and procedures regarding
compliance with laws and regulations. We communicated identified laws
and regulations throughout our team and remained alert to any indications of
non-compliance throughout the audit. The potential effect of these laws and
regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the
financial statements including financial reporting legislation (including
related companies legislation), distributable profits legislation and taxation
legislation and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the
consequences of non-compliance could have a material effect on amounts
or disclosures in the financial statements, for instance through the imposition
of fines or litigation. We identified the following areas as those most likely
to have such an effect: food safety, health and safety, employment laws,
GDPR and environmental laws and regulations recognising the nature of the
Group’s activities. Auditing standards limit the required audit procedures to
identify non-compliance with these laws and regulations to enquiry of the
Directors and other management and inspection of regulatory and legal
correspondence, if any. These limited procedures did not identify actual or
suspected non-compliance.
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our
audit in accordance with auditing standards. For example, the further
removed non-compliance with laws and regulations (irregularities) is from
the events and transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards would
identify it. In addition, as with any audit, there remained a higher risk of non-
detection of irregularities, as these may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. We are
not responsible for preventing non-compliance and cannot be expected to
detect non-compliance with all laws and regulations.
8. The purpose of our audit work and to whom we
owe our responsibilities
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this report, or for the
opinions we have formed.
John Leech (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
10 December 2020
Marston’s PLC Annual Report and Accounts 2020Financial Statements
84
Group Income Statement
For the 53 weeks ended 3 October 2020
Continuing operations
Revenue
Operating expenses
Operating profit/(loss)
Finance costs
Finance income
Interest rate swap movements
Net finance costs
(Loss)/profit before taxation
Taxation
(Loss)/profit for the period from
Note
2, 3
3
2, 4
6
6
4, 6
4, 6
4, 7
Underlying
£m
515.5
(458.8)
56.7
(96.1)
1.0
–
(95.1)
(38.4)
14.6
2020
Non-
underlying
(note 4)
£m
–
(342.2)
(342.2)
(2.7)
1.0
(6.4)
(8.1)
(350.3)
25.6
continuing operations
Discontinued operations
Profit/(loss) from discontinued operations
(Loss)/profit for the period attributable to
equity shareholders
(23.8)
(324.7)
(348.5)
8
13.3
(24.4)
(11.1)
(10.5)
(349.1)
(359.6)
(Loss)/earnings per share:
Basic (loss)/earnings per share
Total
Continuing
Discontinued
Basic underlying (loss)/earnings per share
Total
Continuing
Discontinued
Diluted (loss)/earnings per share
Total
Continuing
Discontinued
Diluted underlying (loss)/earnings per share
Total
Continuing
Discontinued
Total
£m
Underlying
£m
515.5
(801.0)
(285.5)
(98.8)
2.0
(6.4)
(103.2)
(388.7)
40.2
784.2
(644.0)
140.2
(77.2)
0.4
–
(76.8)
63.4
(8.8)
54.6
25.6
80.2
Note
9
9
9
9
2019
(Restated)
Non-
underlying
(note 4)
£m
–
(59.3)
(59.3)
(0.6)
0.5
(48.7)
(48.8)
(108.1)
16.1
Total
£m
784.2
(703.3)
80.9
(77.8)
0.9
(48.7)
(125.6)
(44.7)
7.3
(92.0)
(37.4)
(5.9)
19.7
(97.9)
(17.7)
2020
p
(56.8)
(55.1)
(1.8)
(1.7)
(3.8)
2.1
(56.8)
(55.1)
(1.8)
(1.7)
(3.8)
2.1
2019
(Restated)
p
(2.8)
(5.9)
3.1
12.7
8.6
4.0
(2.8)
(5.9)
3.1
12.7
8.6
4.0
The comparative information for the 52 weeks ended 28 September 2019 has been restated for the prior period adjustments detailed in note 35 and the asset
class split detailed in note 36. The comparatives have also been represented to show discontinued operations separately from continuing operations.
Marston’s PLC Annual Report and Accounts 2020
Group Statement of Comprehensive Income
For the 53 weeks ended 3 October 2020
Loss 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 for the period
Total comprehensive expense for the period attributable to equity shareholders
Other comprehensive expense for the current and prior period relates wholly to continuing operations.
85
2019
(Restated)
£m
(17.7)
(20.5)
2.11
1.5
(7.8)
(54.7)
2.8
(25.1)
10.6
(66.4)
(74.2)
(91.9)
2020
£m
(359.6)
(3.8)
21.3
(0.3)
17.2
(6.5)
–
(151.2)
17.7
(140.0)
(122.8)
(482.4)
Marston’s PLC Annual Report and Accounts 2020Financial Statements
86
Group Cash Flow Statement
For the 53 weeks ended 3 October 2020
Operating activities
Underlying operating profit
Depreciation and amortisation
Underlying EBITDA
Non-underlying operating items
EBITDA
Working capital movement
Non-cash movements
Increase/(decrease) in provisions and other non-current liabilities
Difference between defined benefit pension contributions paid and amounts 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 trade loans
Finance lease capital repayments received
Net transfer from other cash deposits
Net cash inflow from investing activities
Financing activities
Equity dividends paid
Interest paid
Arrangement costs of bank facilities
Proceeds from sale of own shares
Repayment of securitised debt
Repayment of bank borrowings
Advance of bank borrowings
Capital element of lease liabilities repaid
Advance/(repayment) of other borrowings
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
2020
£m
74.0
51.6
125.6
(367.0)
(241.4)
71.9
334.1
1.0
(7.3)
(1.8)
156.5
1.5
74.9
(63.7)
1.2
1.5
–
15.4
(30.4)
(91.0)
–
–
(33.4)
(60.7)
–
(8.3)
55.0
(168.8)
3.1
2019
(Restated)
£m
172.8
42.2
215.0
(66.4)
148.6
10.3
52.1
(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)
Note
2
2
31
31
30
32
30
Marston’s PLC Annual Report and Accounts 2020
Group Balance Sheet
As at 3 October 2020
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
Current tax assets
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
Liabilities held for sale
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
Note
10
11
12
13
14
15
16
17
18
19
21
22
23
18
19
21
24
23
14
15
28
29
29
29
3 October
2020
£m
–
32.5
2,038.3
17.5
16.7
–
2,105.0
10.4
16.2
8.0
2.0
40.6
77.2
349.7
426.9
(64.7)
(37.0)
(222.1)
–
(1.1)
(324.9)
(111.0)
(435.9)
28 September
2019
(Restated)
£m
29 September
2018
(Restated)
£m
230.3
88.5
2,306.1
9.3
5.8
–
2,640.0
43.6
90.9
–
2.0
37.6
174.1
1.7
175.8
(54.9)
(19.9)
(248.3)
(1.7)
(2.6)
(327.4)
–
(327.4)
230.3
70.0
2,361.6
9.6
–
15.6
2,687.1
44.6
104.9
–
120.0
41.4
310.9
2.3
313.2
(158.4)
(14.6)
(252.2)
(4.0)
(2.8)
(432.0)
–
(432.0)
(1,610.9)
(187.4)
(3.9)
(7.7)
–
(37.2)
(1,847.1)
248.9
(1,383.4)
(215.6)
(2.6)
(19.7)
(56.5)
(36.4)
(1,714.2)
774.2
(1,389.0)
(162.9)
(1.5)
(22.5)
(73.8)
–
(1,649.7)
918.6
48.7
334.0
430.6
23.7
6.8
(108.7)
(111.9)
(374.3)
248.9
48.7
334.0
573.4
23.7
6.8
(125.9)
(112.0)
25.5
774.2
48.7
334.0
600.2
23.7
6.8
(118.1)
(112.3)
135.6
918.6
The financial statements were approved by the Board and authorised for issue on 10 December 2020 and are signed on its behalf by:
Ralph Findlay
Chief Executive Officer
10 December 2020
Marston’s PLC Annual Report and Accounts 2020Financial Statements
88
Group Statement of Changes in Equity
For the 53 weeks ended 3 October 2020
At 29 September 2019 (as originally
reported)
Prior period adjustment
Adjustment for asset class split
Tax impact of asset class split
At 29 September 2019 (as restated)
Adjustment for adoption of IFRS 16
Tax impact of IFRS 16 adjustment
At 29 September 2019 (as adjusted)
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 impairment
Deferred tax on properties
Total comprehensive (expense)/income
Share-based payments
Sale of own shares
Transfer disposals to retained earnings
Transfer tax to retained earnings
Dividends paid
Total transactions with owners
At 3 October 2020
Equity
share
capital
£m
48.7
–
–
–
48.7
–
–
48.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48.7
Share
premium
account
£m
334.0
–
–
–
334.0
–
–
334.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
334.0
For the 52 weeks ended 28 September 2019
At 30 September 2018 (as originally
reported)
Prior period adjustment
Adjustment for asset class split
Tax impact of asset class split
At 30 September 2018 (as restated)
Adjustment for adoption of IFRS 9
Tax impact of IFRS 9 adjustment
At 30 September 2018 (as adjusted)
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
Dividends paid
Total transactions with owners
At 28 September 2019 (as restated)
Equity
share
capital
£m
48.7
–
–
–
48.7
–
–
48.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48.7
Share
premium
account
£m
334.0
–
–
–
334.0
–
–
334.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
334.0
Revaluation
reserve
£m
Merger
reserve
£m
Capital
redemption
reserve
£m
598.9
–
(29.9)
4.4
573.4
–
–
573.4
–
–
–
–
–
–
(151.2)
15.7
(135.5)
–
–
(8.1)
0.8
–
(7.3)
430.6
Revaluation
reserve
(Restated)
£m
627.2
–
(31.6)
4.6
600.2
–
–
600.2
–
–
–
–
–
–
2.8
(25.1)
1.3
(21.0)
–
–
–
(6.8)
1.0
–
(5.8)
573.4
23.7
–
–
–
23.7
–
–
23.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23.7
Merger
reserve
£m
23.7
–
–
–
23.7
–
–
23.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23.7
6.8
–
–
–
6.8
–
–
6.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
Capital
redemption
reserve
£m
6.8
–
–
–
6.8
–
–
6.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
Further detail in respect of the Group’s equity is provided in notes 28 and 29.
Hedging
reserve
£m
(125.9)
–
–
–
(125.9)
–
–
(125.9)
–
–
–
(3.8)
21.3
(0.3)
–
–
17.2
–
–
–
–
–
–
(108.7)
Hedging
reserve
£m
(118.1)
–
–
–
(118.1)
–
–
(118.1)
–
–
–
(20.5)
2.11
1.5
–
–
–
(7.8)
–
–
–
–
–
–
–
(125.9)
Own
shares
£m
Retained
earnings
£m
Total
equity
£m
(112.0)
–
–
–
(112.0)
–
–
(112.0)
–
–
36.9
3.6
(14.4)
(0.6)
25.5
(15.9)
3.0
12.6
(359.6)
(6.5)
1.811
3.6
(44.3)
3.8
774.2
(15.9)
3.0
761.3
(359.6)
(6.5)
–
–
2.0
–
2.0
(3.8)
–
–
–
–
–
–
0.1
–
–
–
0.1
(111.9)
Own
shares
£m
(112.3)
–
–
–
(112.3)
–
–
(112.3)
–
–
–
–
–
–
–
–
–
–
–
–
0.3
–
–
–
0.3
(112.0)
–
–
–
–
(364.1)
0.4
(0.1)
8.1
(0.8)
(30.4)
(22.8)
(374.3)
21.3
(0.3)
(151.2)
15.7
(482.4)
0.4
–
–
–
(30.4)
(30.0)
248.9
Retained
earnings
(Restated)
£m
Total
equity
(Restated)
£m
147.6
3.6
(14.9)
(0.7)
135.6
(6.7)
1.2
130.1
(17.7)
(54.7)
9.3
–
–
–
–
–
–
(63.1)
0.3
0.1
(0.2)
6.8
(1.0)
(47.5)
(41.5)
25.5
957.6
3.6
(46.5)
3.9
918.6
(6.7)
1.2
913.1
(17.7)
(54.7)
9.3
(20.5)
2.11
1.5
2.8
(25.1)
1.3
(91.9)
0.3
0.1
0.1
–
–
(47.5)
(47.0)
774.2
Marston’s PLC Annual Report and Accounts 2020
89
Notes
For the 53 weeks ended 3 October 2020
1 Accounting policies
The Group’s principal accounting policies are set out below:
Basis of preparation
These consolidated financial statements for the 53 weeks ended 3 October 2020 (2019: 52 weeks ended 28 September 2019) have been prepared in
accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee 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 effective freehold land and buildings,
certain financial instruments, retirement benefits and share-based payments as explained below.
Prior period adjustments
The Group has identified adjustments to prior periods regarding the amount of deferred tax recognised in respect of land and buildings which were held under
finance leases under IAS 17 ‘Leases’ and the split of derivative financial instruments between non-current and current liabilities. As such the comparatives for the
52 weeks ended 28 September 2019 have been restated in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. Full
details are provided in note 35.
Asset class split
The Group has split the land and buildings asset class within property, plant and equipment into an effective freehold class, held under the revaluation model,
and a leasehold class, held under the cost model. This change has been applied retrospectively in accordance with IAS 8 ‘Accounting Policies, Changes in
Accounting Estimates and Errors’ and as such the comparatives for the 52 weeks ended 28 September 2019 have been restated. Full details are provided in
note 36.
New standards
The Group has adopted IFRS 16 ‘Leases’ in the current period using the modified retrospective approach in paragraph C5(b) of the standard, whereby
comparative amounts have not been restated and the cumulative effect of initially applying the standard has been recognised as an adjustment to opening
retained earnings at 29 September 2019. IFRS 16 introduces an ‘on balance sheet’ model for lessees and as such the Group has recognised a lease liability
within borrowings in respect of the majority of its previous operating leases along with either a right-of-use asset in property, plant and equipment or a finance
lease receivable (for some sublet properties). The rental payments/receipts previously charged/credited to the income statement are treated as repayments
of the lease liability/finance lease receivable and the income statement now includes depreciation of the right-of-use asset and interest on the lease liability/
finance lease receivable. Further details of the adoption of IFRS 16 are provided in note 37.
The Group has also adopted the amendment to IFRS 16 which provides lessees with an exemption from assessing whether a COVID-19-related rent
concession is a lease modification.
The International Accounting Standards Board (IASB) have issued the following new or revised standards with an effective date for financial periods beginning
on or after the dates disclosed below. These standards have not yet been adopted by the Group. The IASB have also issued a number of minor amendments to
standards as part of their Annual Improvements to IFRS.
IFRS 3
Business Combinations
Amendments to clarify the definition of a business
IFRS 4
Insurance Contracts
Amendments regarding the expiry date of the deferral approach
Amendments regarding replacement issues in the context of the IBOR reform
IFRS 7
Financial Instruments: Disclosures
Amendments regarding pre-replacement issues in the context of the IBOR reform
Amendments regarding replacement issues in the context of the IBOR reform
IFRS 9
Financial Instruments
Amendments regarding pre-replacement issues in the context of the IBOR reform
Amendments regarding replacement issues in the context of the IBOR reform
IFRS 10
Consolidated Financial Statements
1 January 2020
1 January 2023
1 January 2021
1 January 2020
1 January 2021
1 January 2020
1 January 2021
Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture
Date deferred
IFRS 16
Leases
Amendments regarding replacement issues in the context of the IBOR reform
IFRS 17
Insurance Contracts
New accounting standard
IAS 1
Presentation of Financial Statements
Amendments regarding the definition of material
Amendments regarding the classification of liabilities
IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
Amendments regarding the definition of material
IAS 16
Property, Plant and Equipment
1 January 2021
1 January 2023
1 January 2020
1 January 2023
1 January 2020
Amendments prohibiting an entity from deducting from the cost of property, plant and equipment amounts received from
selling items produced while the entity is preparing the asset for its intended use
1 January 2022
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
Date deferred
IAS 37
Provisions, Contingent Liabilities and Contingent Assets
Amendments regarding the costs to include when assessing whether a contract is onerous
1 January 2022
It is not anticipated that any of the above unadopted new standards will have a material impact on the Group’s results or financial position.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
90
Notes continued
For the 53 weeks ended 3 October 2020
1 Accounting policies (continued)
Going concern
The impact of COVID-19 on the economy and the hospitality industry has resulted in heightened uncertainty about the future financial performance of the
Group and the Company, which could cast significant doubt over the Group’s ability to trade as a going concern. The COVID-19 pandemic has resulted in a
variety of temporary operating restrictions and it is not clear when these restrictions, such as social distancing measures and reduced pub opening times, will be
removed and whether any further local or national lockdowns will be required.
The Directors have performed an assessment of the going concern assessment period, being the period of 12 months from the date of signing these financial
statements, including capital expenditure and cash flow forecasts, to assess the adequacy of the Group’s financial resources. In performing their assessment, the
Directors considered the Group’s financial position and exposure to principal risks, including the ongoing impact of COVID-19. The Group’s forecasts assume
that sales will gradually recover to pre-COVID-19 levels over the next year, with social distancing measures reducing from April 2021. The Directors have also
considered a severe but plausible downside scenario, which incorporates a further lockdown and pub opening restrictions at a national level for a two month
period in January and February 2021. The conclusion of this assessment was that the Directors are satisfied that the Group has sufficient liquidity to withstand
such a severe but plausible downside scenario. The completion of the disposal of the Group’s brewing operations in October 2020 has improved the Group’s
liquidity significantly, with an initial cash payment of £232.7 million received on 30 October 2020. However, under this severe but plausible downside
scenario, further covenant waivers/amendments would be required.
The Group has secured waivers from its bondholders in respect of the free cash flow covenant up to April 2021 and has agreed with its other lenders to
replace existing financial covenant tests with a liquidity and profit covenant from 3 October 2020 up to July 2021. There is a material uncertainty as to
whether the financial covenants will be met or whether the Group’s lenders will agree to further waivers if required. The Group will continue to have regular
communication with its lenders throughout this period.
Considering the above, the Directors are satisfied that the Group and the Company have adequate resources to continue in operational existence for the
foreseeable future, being at least 12 months from the date of signing these financial statements. For this reason, the Directors continue to adopt the going
concern basis of accounting in preparing these financial statements. However, a material uncertainty exists, in particular with respect to the ability to achieve
further covenant waivers or amendments if required, which may cast significant doubt on the Group’s ability to continue as a going concern and, therefore, to
continue realising its assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that would
result from the basis of preparation being inappropriate.
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 date when
control ceased. Transactions between Group companies are eliminated on consolidation.
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 in respect of continuing operations comprises retail sales and wholesale sales.
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. 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.
Marston’s PLC Annual Report and Accounts 2020
91
1 Accounting policies (continued)
The Group’s revenue from contracts with customers in respect of discontinued operations comprises wholesale sales and contract services.
Wholesale sales
The Group sells drinks to wholesalers, retailers and other pub operators. 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 from continuing operations. This income is recognised in the
period to which it relates.
Other operating income mainly comprises amounts receivable under the Coronavirus Job Retention Scheme and rent receivable from unlicensed properties.
These are recognised in the period to which they relate.
Operating segments
For segment reporting purposes the Group is considered to have three distinguishable operating segments, being Pubs and Bars, 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.
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.
Non-underlying 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 non-underlying is higher than other items.
Details in respect of non-underlying items recognised in the current and prior period are provided in notes 4 and 8.
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
5 to 20 years
10 years
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.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
92
Notes continued
For the 53 weeks ended 3 October 2020
1 Accounting policies (continued)
Property, plant and equipment
• Effective freehold land and buildings are initially stated at cost and subsequently at valuation. Leasehold land and buildings, 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.
• Land and buildings are depreciated to their residual values over the lower of the lease term (where applicable) 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.
Residual values and useful lives are reviewed and adjusted if appropriate at each balance sheet date.
Effective freehold land and buildings 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. Most of the Group’s effective freehold land and buildings 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.
For effective freehold land and buildings revaluation 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.
The property estate is assessed at each reporting date to ensure that the carrying amount does not differ materially from that which would be determined using
fair value at the end of the reporting period. This is consistent with the requirements of IAS 16 ‘Property, Plant and Equipment’.
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 and any associated lease liabilities.
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 of each significant cash generating unit.
These cash generating units are no larger than the operating segments set out in note 2 under IFRS 8 ‘Operating Segments’. 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. The impairment loss is recognised in the income statement unless the asset is carried at a revalued amount, in which case the impairment loss is
charged to the revaluation reserve to the extent that a previous gain has been recorded, and thereafter to the income statement.
For goodwill and intangible assets that have an indefinite life, the recoverable amount is assessed annually and an impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount.
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 brand portfolio basis.
Leases
At the inception of a contract the Group assesses whether that contract is or contains a lease. This is the case if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration. The Group has taken the practical expedient in paragraph C3 of IFRS 16 ‘Leases’ not to
reassess whether an existing contract is or contains a lease at the date of initial application and as such the IFRS 16 definition of a lease has only been applied
to contracts which were entered into or amended on or after 29 September 2019.
The Group has elected not to apply the lessee requirements of IFRS 16 to short-term leases and leases for which the underlying asset is of low value. The lease
payments for such leases are recognised as an expense on a straight-line basis over the lease term.
For all other leases where it is the lessee the Group recognises a lease liability and a right-of-use asset at the commencement date of the lease.
The lease liability is recognised as the present value of the lease payments discounted using either the interest rate implicit in the lease or, where that rate cannot
be readily determined, the Group’s incremental borrowing rate. The lease payments include variable payments that depend on an index or rate and the
exercise price of a purchase option if it is reasonably certain that it will be exercised. The lease liability is subsequently increased to reflect the interest thereon,
reduced by the lease payments made and remeasured to reflect any reassessments or lease modifications, such as a change in future lease payments resulting
from a change in an index or rate or a change in the lease term.
Marston’s PLC Annual Report and Accounts 2020
93
1 Accounting policies (continued)
The right-of-use asset is recognised at an amount equal to the total of the lease liability, any lease payments made at or before the commencement date, any
initial direct costs and the estimated future dismantling, removal and site restoration costs. The Group has elected to apply the revaluation model to right-of-use
assets relating to the effective freehold land and buildings class of property, plant and equipment. All other right-of-use assets are held under the cost model
and subsequently measured at cost less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of the lease liability.
For assets where the Group is the lessor, 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. Where the Group is an intermediate lessor of an asset, the sublease is classified as
a finance lease or an operating lease by reference to the right-of-use asset arising from the head lease rather than the underlying asset.
Income receivable under operating leases is credited to the income statement on a straight-line basis over the term of the lease.
Where a sublease is classified as a finance lease the right-of-use asset is derecognised and the Group recognises a finance lease receivable at an amount
equal to the net investment in the lease. The lease payments are discounted at the interest rate implicit in the lease, or where this cannot be readily determined,
the discount rate used for the head lease. Finance income is recognised over the lease term based on a pattern reflecting a constant periodic rate of return on
the net investment in the lease.
In the prior period under IAS 17 ‘Leases’, leases were classified as finance leases if the terms of the lease transferred substantially all the risks and rewards of
ownership to the lessee. All other leases were classified as operating leases.
The cost or valuation of assets held under finance leases was included within property, plant and equipment and depreciation was charged in accordance
with the accounting policy for each class of asset concerned. The corresponding capital obligations under these leases were shown as liabilities. The finance
charge element of rentals was charged to the income statement and classified within finance costs as incurred.
Rental costs under operating leases, including lease incentives, were charged to the income statement on a straight-line basis over the term of the lease.
Similarly, income receivable under operating leases was 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 IFRS 16 or IAS 17 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. Finished goods and work in progress
include direct materials, labour and a proportion of attributable overheads.
Assets and disposal groups held for sale
Assets, typically properties and related fixtures and fittings, and disposal groups comprising assets and liabilities, are categorised as held for sale when their
value will be recovered through a sale transaction rather than continuing use. This condition is met when the sale is highly probable, the asset or disposal group
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 and disposal groups held for sale are valued at the lower of carrying value
and fair value less costs to sell. Once classified as held for sale intangible assets and property, plant and equipment are no longer amortised or 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.
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 finance lease receivables, 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.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
94
Notes continued
For the 53 weeks ended 3 October 2020
1 Accounting policies (continued)
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 derivatives is split between non-current and current assets/liabilities based on the remaining maturity profile. The portion of the remaining
maturity that is more than 12 months is classified as non-current and the portion of the remaining maturity that is less than 12 months is classified as current.
Accrued interest is recognised separately in current assets/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 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 held at fair value and classified within other non-current assets in the balance sheet.
Finance lease receivables
Finance lease receivables are recognised at an amount equal to the net investment in the lease and subsequently measured at amortised cost less provision
for impairment.
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.
The Group applies the expected credit loss model to calculate any loss allowance for finance lease receivables, trade receivables and other receivables. For
finance lease receivables, 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 receivables 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 finance lease receivables, trade receivables and other receivables are given in note 25.
The carrying amount of finance lease receivables, 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 finance lease
receivables, 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.
Marston’s PLC Annual Report and Accounts 2020
95
1 Accounting policies (continued)
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 non-underlying 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 key management personnel are the Directors of the Group and as such the Directors are related parties of the Group.
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.
Provisions are recognised for the reinstatement costs of leasehold properties at the end of the lease term. Where leasehold properties are empty and/or loss
making the unavoidable ongoing future costs associated with the properties are also recognised as provisions. Following the adoption of IFRS 16 ‘Leases’ in
the current period rent is now excluded from these costs.
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 expected future expenditure.
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.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
96
Notes continued
For the 53 weeks ended 3 October 2020
1 Accounting policies (continued)
Dividends
Dividends proposed by the Board but unpaid at the period end are recognised in the financial statements when they have been approved by the shareholders.
Interim dividends are recognised when paid.
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.
Government grants
Government grants are recognised when there is reasonable assurance the grants will be received and the conditions of the grant will be complied with.
Income from government grants is included within other operating income.
Key estimates 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 non-underlying
items, property, plant and equipment, impairment, retirement benefits and financial instruments. 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:
Non-underlying items
• Determination of items to be classified as non-underlying (see accounting policy).
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 effective freehold land and buildings (note 12).
Impairment
• Assumptions made in the value in use calculation, in particular the cash flow projections, the pre-tax discount rate applied to the cash flow projections and
the growth rate used to extrapolate projected cash flows beyond the cash flow projection period (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).
2 Segment reporting
Revenue by segment
Pubs and Bars
Brewing
Group Services
Total revenue
Revenue from discontinued operations
Revenue from continuing operations
Underlying operating profit by segment
Pubs and Bars
Brewing
Group Services
Underlying operating profit
Underlying operating profit from discontinued operations
Underlying operating profit from continuing operations
Non-underlying operating items
Operating (loss)/profit
Net finance costs
Loss before taxation from continuing operations
2020
£m
515.5
305.5
–
821.0
(305.5)
515.5
2020
£m
84.7
17.3
(28.0)
74.0
(17.3)
56.7
(342.2)
(285.5)
(103.2)
(388.7)
2019
(Restated)
£m
784.2
389.3
–
1,173.5
(389.3)
784.2
2019
(Restated)
£m
167.5
32.6
(27.3)
172.8
(32.6)
140.2
(59.3)
80.9
(125.6)
(44.7)
Marston’s PLC Annual Report and Accounts 2020
2 Segment reporting (continued)
Other segment information
Pubs and Bars
Brewing
Group Services
Total
Discontinued operations
Continuing operations
97
Additions to
non-current assets*
Depreciation and
amortisation
2020
£m
48.9
7.2
6.2
62.3
(7.2)
55.1
2019
(Restated)
£m
104.9
16.7
7.6
129.2
(16.7)
112.5
2020
£m
36.9
9.7
5.0
51.6
(9.7)
41.9
2019
(Restated)
£m
26.3
5.11
4.4
42.2
(11.5)
30.7
* Excludes amounts relating to deferred tax, retirement benefits and financial instruments.
In the prior period the Group had four distinguishable operating segments being Destination and Premium, Taverns, Brewing and Group Services. Following a
reorganisation of the pub operational and commercial structure, the pub business has now merged into one segment and is no longer operated as Destination
and Premium and Taverns. Since the start of the current period the results of the merged operations have been presented as one combined ‘Pubs and Bars’
segment in the reporting to the chief operating decision maker and management decisions are now made on a combined basis. The results for the 52 weeks
ended 28 September 2019 have been restated to reflect the merging of these two segments.
Geographical areas
Revenue generated outside the United Kingdom during the period was £11.0 million (2019: £12.8 million). This relates wholly to discontinued operations and
the Brewing segment. All of the Group’s assets are located in the UK.
3 Revenue and operating expenses
Revenue
Retail sales
Wholesale sales
Revenue from contracts with customers
Rental income
Total revenue from continuing operations
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
Impairment of freehold and leasehold properties
Impairment of goodwill
Other net operating charges
Operating expenses for continuing operations
2020
£m
479.5
27.5
507.0
8.5
515.5
2020
£m
1.0
(3.0)
(37.5)
146.9
38.9
3.0
174.4
1.0
–
106.8
200.6
168.9
801.0
2019
£m
722.8
46.7
769.5
14.7
784.2
2019
(Restated)
£m
(0.5)
(7.9)
(8.0)
231.5
29.2
1.5
188.9
1.8
19.5
38.1
–
209.2
703.3
Government grants of £33.3 million (2019: £nil) in respect of the Coronavirus Job Retention Scheme and £0.8 million (2019: £nil) in respect of the Retail,
Hospitality and Leisure Grant Fund are included within other operating income from continuing operations.
The amounts included in the line items above which have been classified as non-underlying are as follows:
Raw materials, consumables and excise duties
Employee costs
Impairment of freehold and leasehold properties
Impairment of goodwill
Other net operating charges
2020
£m
3.9
2.0
105.1
200.6
30.6
342.2
2019
(Restated)
£m
–
5.5
37.6
–
16.2
59.3
Marston’s PLC Annual Report and Accounts 2020Financial Statements
98
Notes continued
For the 53 weeks ended 3 October 2020
3 Revenue and operating expenses (continued)
Fees payable to the Company’s Auditor were as follows:
Fees payable to the Company’s Auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s Auditor for other services to the Group:
The audit of the Company’s subsidiaries
Audit related assurance services
Fees in the current period were payable to KPMG LLP and fees in the prior period were payable to PricewaterhouseCoopers LLP.
4 Non-underlying items
Non-underlying operating items
Impact of change in rate assumptions used for 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
Impairment of goodwill
Portfolio disposals
Impact of COVID-19
VAT claims
Non-underlying non-operating items
Net interest on net defined benefit asset/liability
Swap recouponing fees
Interest on VAT claims
COVID-19 financing costs
Interest rate swap movements
Total non-underlying items for continuing operations
2020
£m
0.3
0.2
0.1
0.6
2020
£m
–
–
105.1
–
0.9
–
200.6
22.4
16.4
(3.2)
342.2
0.6
–
(1.0)
2.1
6.4
8.1
350.3
2019
£m
0.2
0.1
0.1
0.4
2019
(Restated)
£m
2.3
1.0
37.6
3.9
9.9
4.6
–
–
–
–
59.3
(0.5)
0.6
–
–
48.7
48.8
108.1
Impairment of freehold and leasehold properties
In light of the COVID-19 outbreak the Group undertook a detailed valuation review of its pub estate in the current period, which resulted in the impairment of a
number of these properties.
In the prior period, due to changes in the market and pub performance, the Group undertook a detailed valuation review of its Destination and Premium estate
and subsequently impaired a number of these properties.
The revaluation adjustments in respect of the above relate wholly to the Pubs and Bars segment and were recognised in the revaluation reserve or income
statement as appropriate.
Write-off of acquisition and development costs
In the prior period the Group 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 intended to acquire and/or develop were written off. Further costs in respect of these sites of £0.9 million were
incurred in the current period.
Impairment of goodwill
The Group has fully impaired the goodwill allocated to the Pubs and Bars segment in the current period (note 10). The inputs to the value in use calculation
were significantly impacted by the COVID-19 outbreak.
Portfolio disposals
As part of its debt reduction strategy, the Group disposed of two portfolios of smaller wet-led leased, tenanted and franchised pubs and associated properties
in the current period. The net loss on disposal and associated costs have been classified as a non-underlying item, together with dilapidations costs from a
previous portfolio disposal.
Marston’s PLC Annual Report and Accounts 2020
99
4 Non-underlying items (continued)
Impact of COVID-19
In order to mitigate the spread of COVID-19 the UK government required the closure of all pubs from 21 March 2020 to 3 July 2020 and has introduced
various other social distancing measures and restrictions. This has had a significant impact on the Group’s business and its customers. Certain associated costs/
charges, which primarily comprise bad debt provisions and stock write-offs, have been classified as a non-underlying item.
VAT claims
In the current period the Group has recognised a net credit of £3.2 million in respect of VAT claims, along with the associated interest of £1.0 million.
This comprises credits received from HM Revenue & Customs (HMRC) in relation to VAT on gaming machine income, following HMRC’s decision not
to further appeal the case brought by The Rank Group Plc, net of the reversal of amounts previously recognised in respect of VAT on pension scheme
management expenses.
Net interest on net defined benefit asset/liability
The net interest on the net defined benefit asset/liability in respect of the Group’s defined benefit pension plan was a charge of £0.6 million (2019: credit of
£0.5 million) (note 15).
COVID-19 financing costs
As a result of the COVID-19 outbreak and the consequential impact on its trading ability, the Group obtained additional financing facilities and certain waivers
from its lenders, primarily in respect of covenants. The costs related to this have been classified as a non-underlying item.
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 £3.8 million (2019: £20.5 million) has been recognised in the hedging reserve in respect of the effective portion of the fair value
movement and £6.7 million (2019: £7.7 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 £1.7
million (2019: £1.8 million) 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 £0.5 million (2019: £1.5 million), has been recognised
within non-underlying items. In addition £14.6 million (2019: £3.5 million) 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 paid of £11.4 million (2019: £1.3 million received) 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 gain of £7.7 million (2019: loss of £46.7 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 recouponing of the interest rate swap that fixes the interest rate payable on the floating rate elements of the Group’s A1, A2, A3 and B
securitised notes on 27 March 2019, 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 £3.2 million (2019 (restated): £1.4 million). The deferred tax credit relating to the
above non-underlying items amounts to £20.6 million (2019 (restated): £14.7 million). In addition, there is a non-underlying deferred tax credit of £1.8 million
(2019: £nil) in relation to the change in corporation tax rate.
Prior period non-underlying items
The update of the discount rate assumptions used in the calculation of the Group’s property lease provisions resulted in an increase of £2.3 million in the total
provision in the prior period.
During the prior period the Group incurred reorganisation and integration costs of £1.0 million.
Due to the rollout of the Group’s new EPOS system the assets relating to the old system were written off in the prior period.
On 26 October 2018 a High Court ruling indicated that Guaranteed Minimum Pensions must be equalised for men and women. This requirement was
reflected in the calculation of the Group’s net defined benefit asset/liability at 28 September 2019 and the resulting additional past service cost was presented
as a non-underlying item in the prior period.
In the prior period the Group incurred fees of £0.6 million in relation to the above swap recouponing undertaken in the period.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
100
Notes continued
For the 53 weeks ended 3 October 2020
5 Employees
Employee costs
Wages and salaries
Social security costs
Pension costs
Share-based payments
Termination costs
Employee costs
Employee costs for discontinued operations
Employee costs for continuing operations
A non-underlying charge of £2.0 million (2019: £5.5 million) is included in employee costs for continuing operations.
Average monthly number of employees
Bar staff
Management, administration and production
Key management personnel compensation
Short-term employee benefits
Share-based payments
6 Finance costs and income
Finance costs
Bank borrowings
Securitised debt
Lease liabilities
Other lease related borrowings
Other interest payable and similar charges
Non-underlying finance costs
Net interest on net defined benefit asset/liability
Swap recouponing fees
COVID-19 financing costs
Total finance costs
Finance income
Deposit and other interest receivable
Non-underlying finance income
Net interest on net defined benefit asset/liability
Interest on VAT claims
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 for continuing operations
2020
£m
205.2
16.6
9.9
0.4
0.4
232.5
(58.1)
174.4
2020
Number
10,392
2,924
2020
£m
1.4
0.1
1.5
2020
£m
15.9
40.4
16.1
20.9
2.8
96.1
0.6
–
2.1
2.7
98.8
(1.0)
(1.0)
–
(1.0)
(1.0)
(2.0)
(0.5)
(7.7)
14.6
6.4
103.2
2019
£m
5.211
17.6
14.4
0.3
2.3
246.1
(57.2)
188.9
2019
Number
11,139
2,914
2019
£m
1.6
–
1.6
2019
(Restated)
£m
14.0
40.4
1.3
19.9
1.6
77.2
–
0.6
–
0.6
77.8
(0.4)
(0.4)
(0.5)
–
(0.5)
(0.9)
(1.5)
46.7
3.5
48.7
125.6
Marston’s PLC Annual Report and Accounts 2020
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
Non-underlying credit in relation to the change in tax rate
Taxation credit for continuing operations reported in the income statement
Statement of comprehensive income
Remeasurement of retirement benefits
Impairment and revaluation of properties
Hedging reserve movements
Taxation credit reported in the statement of comprehensive income
101
2019
(Restated)
£m
5.5
(0.7)
(1.4)
3.4
6.0
(2.0)
(14.7)
–
(10.7)
(7.3)
2019
(Restated)
£m
(9.3)
(1.3)
(1.5)
(12.1)
2020
£m
(2.9)
(0.3)
(3.2)
(6.4)
(4.3)
(7.1)
(20.6)
(1.8)
(33.8)
(40.2)
2020
£m
(2.0)
(15.7)
0.3
(17.4)
A deferred tax charge of £5.0 million (2019: £nil) relating to the change in corporation tax rate has been recognised in the statement of comprehensive income
and is included in the above amounts.
Recognised directly in equity
Tax on share-based payments
Taxation credit recognised directly in equity
2020
£m
–
–
2019
£m
(0.1)
(0.1)
The actual tax rate for the period is lower (2019: lower) than the standard rate of corporation tax of 19% (2019: 19%). The differences are explained below:
Tax reconciliation
Loss before tax from continuing operations
Loss before tax multiplied by the corporation tax rate of 19% (2019: 19%)
Effect of:
Adjustments in respect of prior periods
Deferred tax asset not recognised
Net deferred tax credit in respect of land and buildings
Costs not deductible for tax purposes
Impairment of goodwill
Other amounts upon which tax relief is available
Impact of difference between deferred and current tax rates
Impact of change in tax rate
Taxation credit for continuing operations
2020
£m
(388.7)
(73.9)
(7.4)
4.9
(0.1)
0.6
38.1
(0.6)
–
(1.8)
(40.2)
2019
(Restated)
£m
(44.7)
(8.5)
(2.7)
–
(0.2)
3.7
–
(0.6)
1.0
–
(7.3)
A UK corporation tax rate of 19% (effective from 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously enacted reduction
in the rate from 19% to 17% from 1 April 2020. This will increase the Group’s future current tax charge accordingly. The deferred tax assets and liabilities at
3 October 2020 have been calculated at 19% (2019: 17%).
Marston’s PLC Annual Report and Accounts 2020Financial Statements
102
Notes continued
For the 53 weeks ended 3 October 2020
8 Discontinued operations
In June 2020, the Company’s shareholders approved a joint venture transaction involving the disposal of the Group’s brewing operations. The transaction was
subject to the approval of the competition authorities, which was obtained on 9 October 2020. The transaction subsequently completed on 30 October 2020.
The Brewing segment was not previously classified as held for sale or within discontinued operations. As such the income statement for the 52 weeks ended
28 September 2019 has been represented to show discontinued operations separately from continuing operations.
Results of discontinued operations
Revenue
Operating expenses
Operating profit/(loss)
Net finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) for the period attributable to
equity shareholders
Underlying
£m
305.5
(288.2)
17.3
(0.9)
16.4
(3.1)
2020
Non-
underlying
£m
–
(24.8)
(24.8)
–
(24.8)
0.4
Total
£m
305.5
(313.0)
(7.5)
(0.9)
(8.4)
(2.7)
Underlying
£m
389.3
(356.7)
32.6
(0.9)
31.7
(6.1)
2019
Non-
underlying
£m
–
(7.1)
(7.1)
–
(7.1)
1.2
Total
£m
389.3
(363.8)
25.5
(0.9)
24.6
(4.9)
13.3
(24.4)
(11.1)
25.6
(5.9)
19.7
Non-underlying operating items in the current period relate to the impact of COVID-19, disposal costs and the impairment of central assets associated with
discontinued operations. Non-underlying operating items in the prior period related to reorganisation and integration costs. Government grants of £6.4 million
(2019: £nil) in respect of the Coronavirus Job Retention Scheme are included within operating expenses for discontinued operations.
Cash flows from discontinued operations
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
Net increase in cash and cash equivalents
2020
£m
63.2
(7.5)
(4.1)
51.6
2019
£m
36.4
(16.4)
4.9
24.9
Marston’s PLC Annual Report and Accounts 2020
103
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 non-underlying items. The Directors consider that the supplementary figures are a
useful indicator of performance.
2020
2019
(Restated)
Basic (loss)/earnings per share
Total
Continuing
Discontinued
Diluted (loss)/earnings per share
Total
Continuing
Discontinued
Underlying (loss)/earnings per share figures
Basic underlying (loss)/earnings per share
Total
Continuing
Discontinued
Diluted underlying (loss)/earnings per share
Total
Continuing
Discontinued
Basic weighted average number of shares
Dilutive potential ordinary shares
Diluted weighted average number of shares
Earnings
£m
(359.6)
(348.5)
(11.1)
(359.6)
(348.5)
(11.1)
(10.5)
(23.8)
13.3
(10.5)
(23.8)
13.3
Per share
amount
p
(56.8)
(55.1)
(1.8)
(56.8)
(55.1)
(1.8)
(1.7)
(3.8)
2.1
(1.7)
(3.8)
2.1
Earnings
£m
(17.7)
(37.4)
19.7
(17.7)
(37.4)
19.7
80.2
54.6
25.6
80.2
54.6
25.6
2020
m
632.7
–
632.7
Per share
amount
p
(2.8)
(5.9)
3.1
(2.8)
(5.9)
3.1
12.7
8.6
4.0
12.7
8.6
4.0
2019
(Restated)
m
632.6
–
632.6
In accordance with IAS 33 ‘Earnings per Share’ the potential ordinary shares are not dilutive as their inclusion would reduce the loss per share.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
104
Notes continued
For the 53 weeks ended 3 October 2020
10 Goodwill
Cost
At 29 September 2019
Net transfers to assets held for sale and disposals
At 3 October 2020
Aggregate impairment
At 29 September 2019
Charged in the period
At 3 October 2020
Net book amount at 28 September 2019
Net book amount at 3 October 2020
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
£m
231.4
(29.7)
201.7
1.1
200.6
201.7
230.3
–
£m
231.4
1.1
230.3
230.3
Impairment testing of goodwill
Goodwill has been allocated to cash generating units which comprise the Group’s 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:
Pubs and Bars
Brewing
2020
£m
–
–
–
2019
(Restated)
£m
200.6
29.7
230.3
The allocation by operating segment for the prior period has been restated for the merging of the Destination and Premium and Taverns segments as these
are no longer independent cash generating units (note 2). The goodwill allocated to the Brewing segment was transferred to assets held for sale in the
current period.
The key assumptions used in determining value in use are the cash flow projections, which are derived from the Board approved budgets and five-year
strategic plans, the pre-tax discount rate applied to the cash flow projections of 10.8% (2019: 5.2%) and the growth rate used to extrapolate the cash flows
beyond the five-year projections of 1.5% (2019: 2.0%). 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 required an impairment of £200.6 million in the current period reducing the balance of goodwill to £nil. This impairment charge
is included within non-underlying operating expenses (note 4). The impairment related to the Pubs and Bars segment which has a recoverable amount of
£1,954.2 million calculated on a value in use basis. The COVID-19 outbreak had a significant impact on the inputs to the value in use calculation, increasing
the discount rate and reducing the forecast cash flows and growth rate.
In the prior period the impairment tests demonstrated that the Group had substantial levels of headroom and as such no impairment of goodwill was required.
Marston’s PLC Annual Report and Accounts 2020
11 Other intangible assets
Cost
At 29 September 2019
Adjustment for adoption of IFRS 16
Additions
Net transfers to assets held for sale and disposals
At 3 October 2020
Amortisation
At 29 September 2019
Adjustment for adoption of IFRS 16
Charge for the period
Impairment
Net transfers to assets held for sale and disposals
At 3 October 2020
Net book amount at 28 September 2019
Net book amount at 3 October 2020
105
Total
£m
94.8
(1.5)
7.11
(63.4)
41.6
6.3
(0.8)
3.0
1.2
(0.6)
9.1
88.5
32.5
Acquired
brands
£m
Lease
premiums
£m
Computer
software
£m
Development
costs
£m
62.1
–
–
(62.1)
–
–
–
–
–
–
–
62.1
–
1.5
(1.5)
–
–
–
0.8
(0.8)
–
–
–
–
0.7
–
31.1
–
7.11
(1.2)
41.6
5.4
–
3.0
1.2
(0.5)
9.1
25.7
32.5
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 were those acquired with new subsidiaries.
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
Acquired
brands
£m
62.1
–
–
62.1
–
–
–
–
62.1
62.1
Lease
premiums
£m
Computer
software
£m
Development
costs
£m
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 related to Brewing. The carrying value of acquired brands was split as follows:
Wychwood
Jennings
Ringwood
Thwaites
Eagle
Total
£m
76.2
20.3
(1.7)
94.8
6.2
1.5
(1.4)
6.3
70.0
88.5
2019
£m
13.6
2.8
2.9
12.8
30.0
62.1
Impairment testing of acquired brands
In the current period acquired brands were transferred to assets held for sale. Prior to this the carrying values of acquired brands were subject to annual
impairment reviews.
In the prior period the recoverable amount of each brand was determined based on the higher of value in use and fair value less costs to sell. The fair value
of each brand was 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 were the cash flow projections, which were derived from the Board approved budgets and strategic
plans, the pre-tax discount rate of 5.2% and the long-term growth rate used to extrapolate cash flows beyond the cash flow projection period of 2.0%. These
assumptions were based on historic trends adjusted for management estimates of future prospects, and took account of economic forecasts, marketing plans,
political factors and assessments of competitors’ strategy. The discount rate used was the Group’s weighted average cost of capital adjusted to reflect market
conditions. These impairment tests demonstrated that the Group had sufficient levels of headroom and as such no impairment of acquired brands was required
in the prior period. Reasonably possible scenarios under sensitivity analysis also did not result in an impairment.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
106
Notes continued
For the 53 weeks ended 3 October 2020
12 Property, plant and equipment
Cost or valuation
At 29 September 2019 (as originally reported)
Adjustment for asset class split
At 29 September 2019 (as restated)
Adjustment for adoption of IFRS 16
Additions
Net transfers to assets held for sale and disposals
Revaluation
At 3 October 2020
Depreciation
At 29 September 2019 (as originally reported)
Adjustment for asset class split
At 29 September 2019 (as restated)
Adjustment for adoption of IFRS 16
Charge for the period
Net transfers to assets held for sale and disposals
Impairment
At 3 October 2020
Net book amount at 28 September 2019 (as restated)
Net book amount at 3 October 2020
Cost or valuation
At 30 September 2018 (as originally reported)
Adjustment for asset class split
At 30 September 2018 (as restated)
Additions
Net transfers to assets held for sale and disposals
Revaluation
At 28 September 2019 (as restated)
Depreciation
At 30 September 2018 (as originally reported)
Adjustment for asset class split
At 30 September 2018 (as restated)
Charge for the period
Net transfers to assets held for sale and disposals
Impairment
At 28 September 2019 (as restated)
Effective
freehold
land and
buildings
£m
2,004.4
–
2,004.4
–
22.6
(157.5)
(243.9)
1,625.6
0.8
–
0.8
–
0.4
(1.1)
–
0.1
2,003.6
1,625.5
Effective
freehold
land and
buildings
(Restated)
£m
2,059.9
–
2,059.9
60.5
(57.0)
(59.0)
2,004.4
0.4
–
0.4
0.4
–
–
0.8
Net book amount at 29 September 2018 (as restated)
Net book amount at 28 September 2019 (as restated)
2,059.5
2,003.6
Leasehold
land and
buildings
£m
110.2
(19.0)
91.2
315.2
5.6
(20.0)
–
392.0
5.1
25.3
30.4
71.1
12.7
(6.7)
13.8
121.3
60.8
270.7
Leasehold
land and
buildings
(Restated)
£m
106.2
(18.9)
87.3
8.0
(4.1)
–
91.2
2.0
27.6
29.6
3.0
(3.4)
1.2
30.4
57.7
60.8
Plant and
machinery
£m
86.6
–
86.6
1.2
3.4
(91.1)
–
0.1
35.7
–
35.7
0.8
5.5
(41.9)
–
0.1
50.9
–
Plant and
machinery
£m
84.8
–
84.8
6.5
(4.7)
–
86.6
32.8
–
32.8
7.0
(4.1)
–
35.7
52.0
50.9
Fixtures,
fittings,
tools and
equipment
£m
333.6
–
333.6
0.4
19.0
(74.3)
–
278.7
142.8
–
142.8
0.3
30.0
(39.2)
2.7
136.6
Total
£m
2,534.8
(19.0)
2,515.8
316.8
50.6
(342.9)
(243.9)
2,296.4
184.4
25.3
209.7
72.2
48.6
(88.9)
16.5
258.1
190.8
142.1
2,306.1
2,038.3
Fixtures,
fittings,
tools and
equipment
£m
344.7
–
344.7
33.9
(45.0)
–
333.6
152.3
–
152.3
30.3
(40.0)
0.2
142.8
Total
(Restated)
£m
2,595.6
(18.9)
2,576.7
108.9
(110.8)
(59.0)
2,515.8
187.5
27.6
215.1
40.7
(47.5)
1.4
209.7
192.4
190.8
2,361.6
2,306.1
Marston’s PLC Annual Report and Accounts 2020
12 Property, plant and equipment (continued)
The net book amount of land and buildings is split as follows:
Freehold land and buildings
Leasehold land and buildings with a term greater than 100 years at acquisition/commencement
Leasehold land and buildings with a term less than 100 years at acquisition/commencement
107
2020
£m
1,469.5
156.0
270.7
1,896.2
2019
(Restated)
£m
1,814.9
188.7
60.8
2,064.4
If the effective freehold land and buildings had not been revalued, the historical cost net book amount would be £1,147.4 million (2019 (restated):
£1,355.7 million).
Cost at 3 October 2020 includes £6.4 million (2019: £9.9 million) of assets in the course of construction.
Interest costs of £0.3 million (2019: £1.6 million) were capitalised in the period in respect of the financing of major projects. The capitalisation rate used was
5% (2019: 5%).
The net loss on disposal of property, plant and equipment, intangible assets and assets held for sale was £20.8 million (2019 (restated): £13.8 million).
Capital expenditure authorised and committed at the period end but not provided for in the financial statements was £2.3 million (2019: £3.5 million).
The net book amount of effective freehold land and buildings held as part of sale and leaseback arrangements that do not fall within the scope of IFRS 16
‘Leases’ or IAS 17 ‘Leases’ was £269.0 million (2019: £348.6 million). The net book amount of plant and machinery held as security for bank borrowings was
£nil (2019: £12.5 million).
The disaggregation of land and buildings into assets leased to tenants under operating leases and those held and used by the Group is as follows:
Effective freehold land and buildings
Cost or valuation
Depreciation
Net book amount
Leasehold land and buildings
Cost
Depreciation
Net book amount
Leased to
tenants
£m
279.9
(0.1)
279.8
Leased to
tenants
£m
12.1
(7.6)
4.5
2020
Used by
the Group
£m
1,345.7
–
1,345.7
2020
Used by
the Group
£m
379.9
(113.7)
266.2
Total
£m
1,625.6
(0.1)
1,625.5
Total
£m
392.0
(121.3)
270.7
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.
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
2020
£m
(109.2)
–
(109.2)
–
(151.2)
(151.2)
(260.4)
2019
(Restated)
£m
(39.4)
1.3
(38.1)
2.8
(25.1)
(22.3)
(60.4)
Marston’s PLC Annual Report and Accounts 2020Financial Statements
108
Notes continued
For the 53 weeks ended 3 October 2020
12 Property, plant and equipment (continued)
Fair value of effective freehold 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 effective freehold land and buildings have been
categorised:
Recurring fair value measurements
Effective freehold land and buildings:
Specialised brewery properties
Other effective freehold land
and buildings
Level 1
£m
–
–
–
Level 2
£m
–
1,625.5
1,625.5
2020
Level 3
£m
–
–
–
2019
(Restated)
Total
£m
–
1,625.5
1,625.5
Level 1
£m
–
–
–
Level 2
£m
–
1,949.4
1,949.4
Level 3
£m
54.2
–
54.2
Total
£m
54.2
1,949.4
2,003.6
There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior period.
The Level 2 fair values of effective freehold 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. A reasonably possible increase of 10% in the multiplier would increase the fair value by £146.5 million and
a reasonably possible decrease of 10% in the multiplier would decrease the fair value by £117.2 million. A reasonably possible increase of 4% in the fair
maintainable trade would increase the fair value by £57.3 million and a reasonably possible decrease of 4% in the fair maintainable trade would decrease
the fair value by £51.7 million. These are based on the top ends of observable multipliers achieved in the market and historic movements in the average fair
maintainable trade.
The Level 3 fair values of the specialised brewery properties were 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 was performed using the depreciated replacement cost approach, which values the properties at the
current cost of replacing them with their modern equivalents less deductions for physical deterioration and all relevant forms of obsolescence and optimisation.
The significant unobservable inputs to the Level 3 fair value measurements are:
Current cost of modern equivalent asset
Amount of adjustment for physical deterioration/obsolescence
Sensitivity of fair value to unobservable inputs
The higher the cost the higher the fair value
The higher the adjustment the lower the fair value
Level 3 recurring fair value measurements
At beginning of the period
Additions
Net transfers to assets held for sale and disposals
Depreciation charge for the period
At end of the period
2020
£m
54.2
0.2
(54.1)
(0.3)
–
2019
£m
53.1
1.5
–
(0.4)
54.2
The Group’s effective freehold land and buildings are revalued by external independent qualified valuers at least once in each rolling three year period. The
last external valuation of the Group’s effective freehold land and buildings 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.
Marston’s PLC Annual Report and Accounts 2020
13 Other non-current assets
Trade loans
Finance lease receivables
109
2020
£m
–
17.5
17.5
2019
£m
9.3
–
9.3
Further detail regarding the fair value measurement of trade loans is provided in note 25. Further detail regarding the impairment of finance lease receivables 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 19% (2019: 17%). The movement on the deferred tax accounts is shown below:
Net deferred tax (asset)/liability
At beginning of the period (as originally reported)
Prior period adjustment
Adjustment for asset class split
At beginning of the period (as restated)
Adjustment for adoption of IFRS 16
Adjustment for adoption of IFRS 9
(Credited)/charged to the income statement:
Continuing operations
Discontinued operations
(Credited)/charged to equity:
Impairment and revaluation of properties
Hedging reserve
Retirement benefits
Share-based payments
Classified as held for sale
At end of the period
Recognised in the balance sheet
Deferred tax liabilities (after offsetting)
Deferred tax assets (after offsetting)
2020
£m
58.1
(3.6)
(3.8)
50.7
(3.0)
–
(33.8)
1.0
(15.7)
0.3
(0.9)
–
(15.3)
(16.7)
2020
£m
–
(16.7)
(16.7)
2019
(Restated)
£m
81.3
(3.6)
(3.9)
73.8
–
(1.2)
(10.7)
0.5
(1.3)
(1.5)
(8.8)
(0.1)
–
50.7
2019
(Restated)
£m
56.5
(5.8)
50.7
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. A deferred tax asset of £4.9 million (2019: £nil) arising on capital losses has not been recognised due to uncertainty over its
future recoverability.
Deferred tax liabilities
At 29 September 2019 (as originally reported)
Prior period adjustment
Adjustment for asset class split
At 29 September 2019 (as restated)
Adjustment for adoption of IFRS 16
(Credited)/charged to the income statement
Credited to equity
Classified as held for sale
At 3 October 2020
Accelerated
capital
allowances
£m
38.8
–
–
38.8
–
(6.4)
–
(6.1)
26.3
Revaluation
of properties
£m
80.9
(3.6)
(3.8)
73.5
0.3
(15.5)
(15.7)
(4.4)
38.2
Rolled over
capital
gains
£m
6.5
–
–
6.5
–
0.9
–
–
7.4
Other
£m
4.6
–
–
4.6
–
0.8
–
(5.4)
–
Total
£m
130.8
(3.6)
(3.8)
123.4
0.3
(20.2)
(15.7)
(15.9)
71.9
Marston’s PLC Annual Report and Accounts 2020Financial Statements
110
Notes continued
For the 53 weeks ended 3 October 2020
14 Deferred tax (continued)
Deferred tax assets
At 29 September 2019
Adjustment for adoption of IFRS 16
Credited to the income statement
(Credited)/charged to equity
Classified as held for sale
At 3 October 2020
Net deferred tax liability/(asset)
At 28 September 2019 (as restated)
At 3 October 2020
Deferred tax liabilities
At 30 September 2018 (as originally reported)
Prior period adjustment
Adjustment for asset class split
At 30 September 2018 (as restated)
Charged/(credited) to the income statement
Credited to equity
At 28 September 2019 (as restated)
Deferred tax assets
At 30 September 2018
Adjustment for adoption of IFRS 9
(Credited)/charged to the income statement
Credited to equity
At 28 September 2019
Net deferred tax liability
At 29 September 2018 (as restated)
At 28 September 2019 (as restated)
15 Retirement benefits
Pensions
£m
(6.1)
–
–
(0.9)
–
(7.0)
Tax losses
£m
(26.8)
–
(2.9)
–
–
(29.7)
Hedging
reserve
£m
(25.8)
–
–
0.3
–
(25.5)
Accelerated
capital
allowances
£m
35.0
–
–
35.0
3.8
–
38.8
Tax losses
£m
(26.4)
–
(0.4)
–
(26.8)
Revaluation
of properties
(Restated)
£m
87.7
(3.6)
(3.9)
80.2
(5.4)
(1.3)
73.5
Hedging
reserve
£m
(24.3)
–
–
(1.5)
(25.8)
Pensions
£m
2.7
–
–
2.7
–
(2.7)
–
Pensions
£m
–
–
–
(6.1)
(6.1)
Interest
rate
swaps
£m
(12.6)
–
(2.9)
–
–
(15.5)
Rolled over
capital
gains
£m
6.8
–
–
6.8
(0.3)
–
6.5
Interest
rate
swaps
£m
(4.2)
–
(8.4)
–
(12.6)
Other
£m
(1.4)
(3.3)
(6.8)
–
0.6
(10.9)
Other
£m
4.3
–
–
4.3
0.3
–
4.6
Other
£m
(0.3)
(1.2)
0.2
(0.1)
(1.4)
Total
£m
(72.7)
(3.3)
(12.6)
(0.6)
0.6
(88.6)
50.7
(16.7)
Total
(Restated)
£m
136.5
(3.6)
(3.9)
129.0
(1.6)
(4.0)
123.4
Total
£m
(55.2)
(1.2)
(8.6)
(7.7)
(72.7)
73.8
50.7
During the period the Group contributed to a funded defined benefit pension plan and a number of defined contribution pension plans. These are considered
to be related parties of the Group.
Defined contribution plans
Pension costs for defined contribution plans are as follows:
Defined contribution plans
2020
£m
9.9
2019
£m
9.8
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 2020
111
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
Cash flows:
Employer contributions
Administrative expenses paid from plan assets
Benefits paid
At end of the period
Fair value
of plan assets
2020
£m
534.4
–
9.5
3.0
–
–
7.3
(0.9)
(22.2)
531.1
2019
£m
516.6
–
14.6
20.3
–
–
7.6
(0.9)
(23.8)
534.4
Present value
of defined
benefit obligation
2020
£m
(570.8)
–
(10.1)
2019
£m
(501.0)
(4.6)
(14.1)
–
(7.8)
(1.8)
–
–
22.2
(568.3)
–
(86.1)
2.11
–
–
23.8
(570.8)
Net (deficit)/
surplus
2020
£m
(36.4)
–
(0.6)
3.0
(7.8)
(1.8)
7.3
(0.9)
–
(37.2)
2019
£m
15.6
(4.6)
0.5
20.3
(86.1)
2.11
7.6
(0.9)
–
(36.4)
Pension costs recognised in the income statement
A charge of £nil (2019: £4.6 million) comprising the past service cost is included within employee costs, a charge of £0.6 million (2019: credit of £0.5 million)
comprising the net interest on the net defined benefit asset/liability is included within non-underlying finance costs/income and a charge of £0.9 million (2019:
£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 was
reflected in the calculation of the Group’s net defined benefit asset/liability in the prior period and the resulting additional past service cost of £4.6 million
was classified as a non-underlying item (note 4).
On 20 November 2020 a further High Court ruling indicated that historic cash equivalent transfer values that were calculated on an unequalised basis
should be topped up if an affected member makes a successful claim. This has created a legal obligation for the plan to pay additional liabilities however at
this stage it is not possible to estimate the impact of this on the net defined benefit asset/liability and as such this has not been reflected in the calculation at 3
October 2020.
It is considered that contributions payable under a minimum funding requirement would be available as a refund or reduction in future contributions after they
are paid into the plan. As such 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.
An updated actuarial valuation of the plan was performed by Mercer as at 3 October 2020 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 non-insured pensioners from age 65 (years)
Male
Female
Life expectancy for current insured pensioners from age 65 (years)
Male
Female
2020
1.7%
2.8%
2.0%
2.9%
2.1%
2.1%
22.7
25.3
20.9
23.5
21.6
23.9
2019
1.8%
2.9%
2.0%
3.0%
2.0%
2.0%
22.8
25.4
21.1
23.4
21.1
23.4
The Group has changed its methodology for determining the CPI inflation assumption in the current period. This has increased the present value of the defined
benefit obligation by £3.7 million.
Mortality assumptions are based on standard tables adjusted for plan experience and with an allowance for future improvement in life expectancy.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
112
Notes continued
For the 53 weeks ended 3 October 2020
15 Retirement benefits (continued)
The sensitivity of the defined benefit obligation to changes in the principal actuarial assumptions is:
Discount rate
Inflation assumption
Life expectancy
Change in assumption
0.25%
0.25%
One year
Increase in assumption
Decrease by 4.0%
Increase by 2.1%
Increase by 4.5%
Decrease in assumption
Increase by 4.3%
Decrease by 2.0%
Decrease by 4.4%
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)
2020
£m
76.5
135.9
58.8
259.9
531.1
2019
£m
103.5
162.0
10.0
258.9
534.4
The actual return on plan assets was a gain of £12.5 million (2019: £34.9 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 2 October 2021 amount to £7.3 million.
The weighted average duration of the defined benefit obligation is 17 years.
Post‑retirement medical benefits
A gain of £0.1 million (2019: loss of £0.1 million) 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
Finance lease receivables
Other receivables
2020
£m
2.8
–
7.6
10.4
2020
£m
4.4
6.0
2.0
3.8
16.2
2019
£m
10.5
1.4
31.7
43.6
2019
£m
61.5
25.4
–
4.0
90.9
Further detail regarding the impairment of trade receivables, finance lease receivables and other receivables is provided in note 25.
All of the Group’s trade receivables are denominated in pounds sterling.
At 3 October 2020 the value of collateral held in the form of cash deposits was £6.0 million (2019: £6.6 million).
Marston’s PLC Annual Report and Accounts 2020
18 Assets and disposal groups held for sale
Assets held for sale
Properties
Disposal groups held for sale – assets
Liabilities held for sale
Disposal groups held for sale – liabilities
113
2019
£m
1.7
–
1.7
2019
£m
–
2020
£m
7.8
341.9
349.7
2020
£m
111.0
Properties
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, if this was below their carrying amount. 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 classified as held for sale were reviewed for impairment or reversal of impairment. This review did not identify
any impairments in the current or prior period.
Disposal groups held for sale
In June 2020, the Company’s shareholders approved a joint venture transaction involving the disposal of the Group’s brewing operations. The transaction was
subject to the approval of the competition authorities, which was obtained on 9 October 2020. The transaction subsequently completed on 30 October 2020.
The fair value less costs to sell of the disposal group was considered to be higher than its carrying amount and as such no impairment was recognised upon
classification of the disposal group as held for sale.
At 3 October 2020 the assets and liabilities of the disposal group were as follows:
Assets
Goodwill
Other intangible assets
Property, plant and equipment
Trade loans
Inventories
Trade and other receivables
Cash and cash equivalents
Liabilities
Borrowings
Trade and other payables
Deferred tax liabilities
2020
£m
29.7
62.1
157.2
8.1
33.9
50.8
0.1
341.9
2020
£m
21.2
74.5
15.3
111.0
Marston’s PLC Annual Report and Accounts 2020Financial Statements
114
Notes continued
For the 53 weeks ended 3 October 2020
19 Borrowings
Current
Bank borrowings
Securitised debt
Lease liabilities
Other lease related borrowings
Other borrowings
Non-current
Bank borrowings
Securitised debt
Lease liabilities
Other lease related borrowings
Other borrowings
Preference shares
2020
£m
(0.7)
34.9
15.9
(0.4)
15.0
64.7
2020
£m
268.2
677.2
288.2
337.2
40.0
0.1
1,610.9
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
Bank borrowings of £nil (2019: £9.2 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 IFRS 16 ‘Leases’ or 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.
The Group has 75,000 (2019: 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. The Group obtained certain covenant waivers from its lenders in the current period as a result of the COVID-19 outbreak.
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
66.3
45.9
460.0
1,134.7
1,706.9
2020
Unamortised
issue costs
£m
(1.6)
(1.6)
(3.7)
(24.4)
(31.3)
Net
borrowings
£m
64.7
44.3
456.3
1,110.3
1,675.6
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)
Fair value of borrowings
The carrying amount and the fair value of the Group’s borrowings are as follows:
Bank borrowings
Securitised debt
Lease liabilities
Other lease related borrowings
Other borrowings
Preference shares
Carrying amount
Fair value
2020
£m
270.0
716.0
304.1
361.7
55.0
0.1
1,706.9
2019
£m
338.1
749.4
21.9
361.7
–
0.1
1,471.2
2020
£m
270.0
543.8
304.1
361.7
55.0
0.1
1,534.7
Net
borrowings
£m
54.9
36.5
429.1
917.8
1,438.3
2019
£m
338.1
725.5
21.9
361.7
–
0.1
1,447.3
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 2020
115
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 3 October 2020, 156 (2019: 26) of the securitised pubs were sold to third parties and no pubs (2019: 1) were sold to other
members of the Group. The carrying amount of the securitised pubs at 3 October 2020 was £1,142.3 million (2019: £1,303.0 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 Group
obtained certain covenant waivers from its bondholders in the current period as a result of the COVID-19 outbreak.
The tranches of securitised debt have the following principal terms:
Tranche
A1
A2
A3
A4
B
2020
£m
–
209.2
200.0
151.8
155.0
716.0
2019
£m
18.8
214.0
200.0
161.6
155.0
749.4
Interest
Floating
Fixed/floating
Fixed/floating
Floating
Fixed/floating
Principal repayment
period – by instalments
2020
2020 to 2027
2027 to 2032
2020 to 2031
2032 to 2035
Expected
average life
N/A
7 years
12 years
11 years
15 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%
Step up date
After step up
July 2012
3 month LIBOR + 1.375%
July 2019
3 month LIBOR + 1.32%
3 month LIBOR + 1.45%
April 2027
3 month LIBOR + 1.625% October 2012
July 2019
3 month LIBOR + 2.55%
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 3 October 2020 Marston’s Pubs Limited held cash of £25.6 million (2019: £19.7 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 (2019: £0.1 million).
21 Derivative financial instruments
Interest rate swaps
Current liabilities
Non-current liabilities
2020
£m
(37.0)
(187.4)
(224.4)
2019
(Restated)
£m
(19.9)
(215.6)
(235.5)
Details of the Group’s interest rate swaps are provided in note 25. Included within current liabilities above is an amount of £19.8 million (2019: £19.9 million)
which relates to interest rate swaps with a maturity of greater than 12 months. An amount of £14.6 million in respect of such interest rate swaps was included in
current liabilities as at 29 September 2018.
22 Trade and other payables
Trade payables
Other taxes and social security
Accruals and deferred income
Other payables
2020
£m
96.9
46.5
66.4
12.3
222.1
2019
£m
9.117
41.2
74.5
14.7
248.3
The Group has deferred VAT payments of £31.8 million under the UK government’s scheme for the deferral of VAT payments due to COVID-19.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
116
Notes continued
For the 53 weeks ended 3 October 2020
23 Provisions for other liabilities and charges
Property leases
At beginning of the period
Adjustment for adoption of IFRS 16
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
2020
£m
22.3
(14.6)
(1.0)
3.0
0.1
(1.0)
8.8
2020
£m
1.1
7.7
8.8
2019
£m
25.3
–
(3.5)
4.4
0.4
(4.3)
22.3
2019
£m
2.6
19.7
22.3
Payments are expected to continue for periods of 1 to 49 years (2019: 1 to 68 years).
In the prior period the £2.3 million increase in the provision as a result of updating the discount rate assumptions used in the calculation was classified as a non-
underlying item (note 4).
24 Other non-current liabilities
Other liabilities
25 Financial instruments
Financial instruments by category
At 3 October 2020
Assets as per the balance sheet
Finance lease receivables (before provision)
Trade receivables (before provision)
Other receivables (before provision)
Other cash deposits
Cash and cash equivalents
At 3 October 2020
Liabilities as per the balance sheet
Derivative financial instruments
Borrowings
Trade payables
Other payables
2020
£m
3.9
2019
£m
2.6
Assets at
amortised
cost
£m
22.4
4.9
12.5
2.0
40.6
82.4
Other
financial
liabilities
£m
–
1,675.6
96.9
12.3
1,784.8
Total
£m
22.4
4.9
12.5
2.0
40.6
82.4
Total
£m
224.4
1,675.6
96.9
12.3
2,009.2
Liabilities
at fair
value
through
profit or
loss
£m
176.5
–
–
–
176.5
Derivatives
used for
hedging
£m
47.9
–
–
–
47.9
Marston’s PLC Annual Report and Accounts 2020
25 Financial instruments (continued)
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
117
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
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
9.
117
14.7
1,806.4
Derivatives
used for
hedging
£m
51.3
–
–
–
51.3
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 tables below show 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
–
2020
Level 2
£m
–
2020
Level 2
£m
224.4
Level 3
£m
–
Level 3
£m
–
Total
£m
–
Total
£m
224.4
Level 1
£m
–
Level 1
£m
–
2019
Level 2
£m
–
2019
Level 2
£m
235.5
Level 3
£m
9.3
Level 3
£m
–
Total
£m
9.3
Total
£m
235.5
There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior period.
The Level 2 fair values of derivative financial instruments have been obtained using a market approach and reflect the estimated amount the Group would
expect to pay or receive on termination of the instruments, 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
Classified as held for sale
At end of the period
2020
£m
9.3
1.6
(2.4)
(0.4)
(8.1)
–
2019
£m
9.6
2.6
(2.7)
(0.2)
–
9.3
Marston’s PLC Annual Report and Accounts 2020Financial Statements
118
Notes continued
For the 53 weeks ended 3 October 2020
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 finance lease receivables, 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 3 October 2020, with all other variables held constant, the post-tax loss for the period
would have been £1.0 million (2019: £1.0 million) higher/lower 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 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 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
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.
The fixed rate of the interest rate swap designated as a hedging instrument at 3 October 2020 was 6.0% (2019: 6.0%).
Interest rate swaps designated as part of a hedging relationship
Carrying amount of hedging instruments (included within derivative financial instruments)
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
2020
£m
47.9
5.0
151.8
(3.8)
(35.4)
(73.3)
(3.8)
(1.2)
6.7
14.6
2019
£m
51.3
20.8
161.6
(35.3)
(38.6)
(87.3)
(20.5)
(0.3)
7.7
3.5
Marston’s PLC Annual Report and Accounts 2020
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
119
2020
£m
(125.9)
(3.8)
21.3
(0.3)
(108.7)
2019
£m
(118.1)
(20.5)
11.2
1.5
(125.9)
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. In the current period the final termination date of one of the swaps was extended to 30 June 2031 and the terms were amended to fix interest
at 2.8% until 30 November 2020 and 4.0% thereafter. This swap has an early termination date of 30 March 2024. The other swap was terminated on 2
November 2020. This swap had a fixed rate of 2.8% until 30 September 2019, with a rate of 3.9% 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 fixes interest at 2.2% and commences on 30 April 2025. There are early termination dates of 30 October 2022 and 1
November 2027. The final termination date is 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 in respect of 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
566.7
2020
Fixed rate
financial
liabilities
£m
1,140.2
Total
£m
1,706.9
Floating rate
financial
liabilities
£m
600.3
2019
Fixed rate
financial
liabilities
£m
870.9
Total
£m
1,471.2
The weighted average interest rate of the fixed rate borrowings was 5.1% (2019: 5.1%) and the weighted average period for which the rate is fixed was
14 years (2019: 11 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 expected credit loss model under IFRS 9 ‘Financial Instruments’ comprise finance lease receivables,
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 2020Financial Statements
120
Notes continued
For the 53 weeks ended 3 October 2020
25 Financial instruments (continued)
Finance lease receivables, trade receivables and other receivables have been grouped as set out below for the purpose of calculating the expected
credit losses:
Gross
Loss allowance
Finance lease receivables
Net investment in the lease
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
2020
£m
22.4
22.4
3.5
0.2
1.2
4.9
8.6
0.8
3.1
12.5
39.8
2020
£m
3.1
36.7
39.8
2019
£m
–
–
3.1
59.4
1.7
64.2
8.7
0.9
3.5
13.1
77.3
2020
£m
2.9
2.9
0.3
0.1
0.1
0.5
8.4
0.1
0.2
8.7
12.1
Gross
Loss allowance
2019
£m
3.5
73.8
77.3
2020
£m
0.2
11.9
12.1
2019
£m
–
–
0.1
2.5
0.1
2.7
8.4
0.5
0.2
9.1
8.11
2019
£m
0.2
11.6
11.8
Finance lease receivables
Finance lease receivables 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. 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 and the value of the asset itself, the remaining balance due is low and as such the expected credit losses are minimal.
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, 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 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 COVID-19 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.
At 3 October 2020 the receivables in respect of amounts invoiced to non-tenant customers were not significant and as such the loss allowance is minimal.
At 28 September 2019 the receivables were grouped based on the number of months the balance had been outstanding. The expected loss rates were based
on historical payment profiles of sales and the credit losses incurred thereon. The historical loss rates were 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 were as follows:
At 28 September 2019
Gross carrying amount
Expected loss rate
1
month
or less
£m
31.6
0.2%
1 to 2
months
£m
17.5
0.4%
2 to 3
months
£m
3.5
0.7%
3 to 4
months
£m
2.5
1.5%
4 to 5
months
£m
0.1
5.7%
5 to 6
months
£m
0.7
9.1%
6 to 12
months
£m
1.5
35.1%
12 to 24
months
£m
0.5
74.7%
More
than 24
months
£m
1.5
86.0%
Total
£m
59.4
Marston’s PLC Annual Report and Accounts 2020
121
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 low and as such the expected credit losses are minimal.
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 finance lease receivables, trade receivables and other receivables are as follows:
Finance lease receivables
At beginning of the period
Net increase in loss allowance recognised in profit or loss
At end of the period
Trade receivables
At beginning of the period
Adjustment for adoption of IFRS 9
At beginning of the period (after adjustment)
Net increase in loss allowance recognised in profit or loss
Amounts written off as uncollectible
Classified as held for sale
At end of the period
Other receivables
At beginning of the period
Adjustment for adoption of IFRS 9
At beginning of the period (after adjustment)
Net (decrease)/increase in loss allowance recognised in profit or loss
Amounts written off as uncollectible
At end of the period
2020
£m
–
2.9
2.9
2020
£m
2.7
–
2.7
2.9
(1.2)
(3.9)
0.5
12-month expected
credit losses
Lifetime expected
credit losses
2020
£m
0.2
–
0.2
–
–
0.2
2019
£m
–
0.2
0.2
–
–
0.2
2020
£m
8.9
–
8.9
(0.1)
(0.3)
8.5
2019
£m
–
–
–
2019
£m
1.5
1.7
3.2
0.2
(0.7)
–
2.7
2019
£m
4.2
4.8
9.0
0.2
(0.3)
8.9
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 monitor 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 2020Financial Statements
122
Notes continued
For the 53 weeks ended 3 October 2020
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 3 October 2020
Borrowings
Derivative financial instruments
Trade payables
Other payables
At 28 September 2019
Borrowings
Derivative financial instruments
Trade payables
Other payables
Less than
1 year
£m
132.8
40.6
96.9
12.3
282.6
Less than
1 year
£m
115.4
20.3
9
.117
14.7
268.3
Between 1
and 2 years
£m
104.7
18.9
–
–
123.6
Between 1
and 2 years
£m
92.8
19.7
–
–
112.5
Between 2
and 5 years
£m
585.8
71.5
–
–
657.3
Between 2
and 5 years
£m
591.4
53.5
–
–
644.9
Over
5 years
£m
1,932.3
169.5
–
–
2,101.8
Over
5 years
£m
1,603.9
206.8
–
–
1,810.7
Total
£m
2,755.6
300.5
96.9
12.3
3,165.3
Total
£m
2,403.5
300.3
9.
117
14.7
2,836.4
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 earnings per share, cash flow, return on capital 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
2020
p
98.2
–
102.0
99.1
97.3
113.4
2019
p
102.3
96.0
95.6
112.7
98.2
123.1
Number of shares
2020
m
7.1
–
–
(3.5)
3.6
0.8
89.0p
to 136.0p
1.5
2019
m
7.6
1.5
(0.1)
(1.9)
7.1
0.6
78.7p
to 136.0p
2.3
Marston’s PLC Annual Report and Accounts 2020
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
123
Number of shares
2020
m
0.4
–
0.4
0.2
2019
m
0.3
0.1
0.4
0.1
Number of shares
2020
m
7.2
2.3
(2.2)
7.3
–
2019
m
6.7
2.7
(2.2)
7.2
–
Weighted average
exercise price
2020
p
–
–
–
–
Weighted average
exercise price
2020
p
–
–
–
–
–
2019
p
–
–
–
–
2019
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
2020
6.2
23.4
0.6
2019
7.7 to 7.8
20.7 to 22.5
0.5 to 0.9
N/A
N/A
5 years
3 years
3 years
5 years
The expected volatility is based on historical volatility over the expected life of the rights.
No options were granted in the current period in relation to the SAYE. The fair value of options granted during the prior period in relation to the SAYE was 7.9p.
No options were granted in the current period in relation to the deferred bonus scheme. The fair value of options granted during the prior period in relation to
the deferred bonus scheme was 79.0p. The fair value of options granted during the period in relation to the LTIP was 90.7p (2019: 67.6p).
The weighted average share price for options exercised over the period was 122.7p (2019: 106.8p). The total charge for the period relating to employee
share-based payment plans was £0.4 million (2019: £0.3 million), all of which related to equity-settled share-based payment transactions. After tax, the total
charge was £0.5 million (2019: £0.2 million).
28 Equity share capital
Allotted, called up and fully paid
Ordinary shares of 7.375p each:
At beginning and end of the period
2020
Number
m
2019
Value
£m
Number
m
Value
£m
660.4
48.7
660.4
48.7
Marston’s PLC Annual Report and Accounts 2020Financial Statements
124
Notes continued
For the 53 weeks ended 3 October 2020
29 Other components of equity
The merger reserve of £23.7 million (2019: £23.7 million) arose on the issue of ordinary shares in the period ended 30 September 2017 and represented the
difference between the nominal value of the shares issued and the net proceeds received.
The capital redemption reserve of £6.8 million (2019: £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
2020
2019
Number
m
1.4
26.3
27.7
Value
£m
1.7
110.2
111.9
Number
m
1.4
26.3
27.7
Value
£m
1.7
110.3
112.0
The market value of own shares held is £11.4 million (2019: £36.3 million). Shares held on trust for employee share schemes represent 0.2% (2019: 0.2%) of
issued share capital. Treasury shares held represent 4.0% (2019: 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
Lease liabilities
Other lease related borrowings
Other borrowings
Debt due after one year
Bank borrowings
Securitised debt
Lease liabilities
Other lease related borrowings
Other borrowings
Preference shares
Net debt
Classified as
held for sale
£m
Cash flow
£m
Non-cash
movements
and deferred
issue costs
£m
Adjustment
for adoption
of IFRS 16
£m
(0.1)
(0.1)
–
–
2.3
–
1.6
–
–
3.9
5.1
–
12.2
–
–
–
17.3
21.1
3.1
3.1
–
–
21.7
33.4
8.3
–
(15.0)
48.4
39.0
–
–
–
(40.0)
–
(1.0)
50.5
–
–
–
–
(1.8)
(35.4)
(11.7)
0.1
–
(48.8)
1.0
35.0
2.7
(0.5)
–
–
38.2
(10.6)
–
–
–
–
–
–
(13.3)
–
–
(13.3)
–
–
(282.0)
–
–
–
(282.0)
(295.3)
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)
2020
£m
40.6
40.6
2.0
2.0
0.7
(34.9)
(15.9)
0.4
(15.0)
(64.7)
(268.2)
(677.2)
(288.2)
(337.2)
(40.0)
(0.1)
(1,610.9)
(1,633.0)
Other cash deposits comprises deposits securing letters of credit for reinsurance contracts. Included within cash and cash equivalents is an amount of £6.0
million (2019: £6.6 million) relating to collateral held in the form of cash deposits. These amounts are both 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 2020
30 Net debt (continued)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash and cash equivalents in the period
Decrease in other cash deposits
Cash outflow from movement in debt
Change in debt resulting from cash flows
Non-cash movements and deferred issue costs
Classified as held for sale
Movement in net debt in the period
Net debt at beginning of the period
Adjustment for adoption of IFRS 16
Net debt at end of the period
Net debt excluding lease liabilities
Lease liabilities
Net debt
Changes in liabilities arising from financing activities are as follows:
2020
Derivative
financial
instruments
£m
(235.5)
–
19.8
(8.7)
–
(224.4)
Total
financing
liabilities
£m
(1,673.8)
(295.3)
67.2
(8.7)
10.6
(1,900.0)
Borrowings
£m
(1,547.4)
–
3.111
–
(2.2)
(1,438.3)
Borrowings
£m
(1,438.3)
(295.3)
47.4
–
10.6
(1,675.6)
At beginning of the period
Adjustment for adoption of IFRS 16
Cash flow
Changes in fair value
Other changes
At end of the period
31 Working capital and non-cash movements
Working capital movement
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase in trade and other payables
Non-cash movements
Income from other non-current assets
Movements in respect of property, plant and equipment, assets held for sale and intangible assets
Impairment of goodwill
Non-cash movements in respect of leases
Share-based payments
125
2019
£m
(3.8)
(118.0)
3.111
(10.5)
(2.2)
–
(12.7)
(1,386.0)
–
(1,398.7)
2019
£m
(1,376.8)
(21.9)
(1,398.7)
Total
financing
liabilities
£m
(1,724.9)
–
119.5
(66.2)
(2.2)
(1,673.8)
2019
£m
1.0
7.9
1.4
10.3
2019
(Restated)
£m
(0.1)
51.9
–
–
0.3
52.1
2020
£m
3.1
–
47.4
50.5
(10.6)
21.1
61.0
(1,398.7)
(295.3)
(1,633.0)
2020
£m
(1,328.9)
(304.1)
(1,633.0)
2019
Derivative
financial
instruments
£m
(177.5)
–
8.2
(66.2)
–
(235.5)
2020
£m
(0.7)
18.5
54.1
71.9
2020
£m
(0.2)
131.2
200.6
2.1
0.4
334.1
Further details of movements in respect of property, plant and equipment, assets held for sale and intangible assets are given in notes 11, 12 and 18.
32 Ordinary dividends on equity shares
Paid in the period
Final dividend for 2019 of 4.8p per share (2018: 4.8p)
Interim dividend for 2020 of nil per share (2019: 2.7p)
A final dividend for 2020 has not been proposed.
2020
£m
30.4
–
30.4
2019
£m
30.4
17.1
47.5
Marston’s PLC Annual Report and Accounts 2020Financial Statements
126
Notes continued
For the 53 weeks ended 3 October 2020
33 Leases
The Group as lessee
The Group leases a number of its properties. Right-of-use assets in respect of leasehold land and buildings with a term exceeding 100 years at acquisition/
commencement of the lease or where there is an option to purchase the freehold at the end of the lease term for a nominal amount are classed as effective
freehold land and buildings within property, plant and equipment. Right-of-use assets in respect of any other leasehold land and buildings are classed as
leasehold land and buildings within property, plant and equipment. The Group’s property leases have various terms, escalation clauses and renewal rights. A
number of the leases include variable payments that depend on changes in RPI, often subject to a cap and collar.
The Group also leases certain items of plant and machinery and fixtures, fittings, tools and equipment. These are generally held under leases with terms of five
years or less and in some cases contain an option to purchase the asset for a nominal amount at the end of the lease.
Depreciation charge for right-of-use assets
Effective freehold land and buildings
Leasehold land and buildings
Plant and machinery
Fixtures, fittings, tools and equipment
Carrying amount of right-of-use assets
Effective freehold land and buildings
Leasehold land and buildings
Plant and machinery
Fixtures, fittings, tools and equipment
Interest expense on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets
Income from subleasing right-of-use assets
Total cash outflow for leases
Additions to right-of-use assets
2020
£m
–
10.6
0.4
0.2
11.2
2020
£m
71.7
231.9
–
1.0
304.6
2020
£m
16.1
0.6
0.4
0.5
25.3
6.4
The table below analyses the Group’s lease liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the
contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than one year
Between one and two years
Between two and five years
Over five years
Future minimum lease rentals payable under non-cancellable operating leases for the prior period under IAS 17 ‘Leases’ were as follows:
Within one year
In more than one year but less than five years
In more than five years
Future minimum lease payments under finance leases for the prior period under IAS 17 were as follows:
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
2020
£m
31.1
23.4
67.3
482.8
604.6
2019
£m
24.2
88.6
480.1
592.9
2019
£m
1.9
6.4
33.7
42.0
(20.1)
21.9
Marston’s PLC Annual Report and Accounts 2020
33 Leases (continued)
The present value of finance lease obligations for the prior period under IAS 17 was as follows:
Within one year
In more than one year but less than five years
In more than five years
Present value of finance lease obligations
127
2019
£m
0.8
2.1
19.0
21.9
The net book amount of effective freehold land and buildings held under finance leases at 28 September 2019 was £25.5 million. The net book amount of
plant and machinery and fixtures, fittings, tools and equipment held under finance leases was £1.6 million.
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. For leases where the Group is the intermediate lessor certain subleases have been reclassified as finance leases upon adoption of IFRS 16 ‘Leases’ as the
classification has been determined by reference to the right-of-use asset arising from the head lease rather than the underlying asset. All other leases continue to
be classified as operating leases from a lessor perspective.
Amounts recognised in the income statement are as follows:
Finance income on the net investment in the lease
Lease income for operating leases
The maturity analysis of the undiscounted lease payments to be received for finance leases is as follows:
Finance leases
Within one year
In more than one year but less than two years
In more than two years but less than three years
In more than three years but less than four years
In more than four years but less than five years
In more than five years
Unearned finance income
Net investment in the lease
The maturity analysis of the undiscounted lease payments to be received for operating leases is as follows:
Operating leases under IFRS 16
Within one year
In more than one year but less than two years
In more than two years but less than three years
In more than three years but less than four years
In more than four years but less than five years
In more than five years
Future minimum lease rentals receivable under non-cancellable operating leases for the prior period were as follows:
Operating leases under IAS 17
Within one year
In more than one year but less than five years
In more than five years
2020
£m
1.0
9.7
2020
£m
5.8
2.9
2.6
2.4
2.1
12.3
28.1
(5.7)
22.4
2020
£m
11.6
9.9
8.7
6.3
4.3
16.3
57.1
2019
£m
16.5
49.4
38.9
104.8
Marston’s PLC Annual Report and Accounts 2020Financial Statements
128
Notes continued
For the 53 weeks ended 3 October 2020
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 £nil (2019: £2.1 million in respect of CGT).
The Group has issued letters of credit totalling £2.4 million (2019: £2.7 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.
35 Prior period adjustments
The Group has identified adjustments to prior periods regarding the amount of deferred tax recognised in respect of land and buildings which were held under
finance leases under IAS 17 ‘Leases’ and the split of derivative financial instruments between non-current and current liabilities. These adjustments have been
corrected by retrospective restatement in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.
The impact of this retrospective restatement on the Group balance sheet as at 28 September 2019 and 29 September 2018 has been set out below.
There was no impact on the Group income statement, Group statement of comprehensive income, Group cash flow statement or loss per share for the
52 weeks ended 28 September 2019. The adjustments shown below are before those made in respect of the asset class split detailed in note 36.
As at 28 September 2019
Impact on the Group balance sheet
Derivative financial instruments – current liabilities
Derivative financial instruments – non-current liabilities
Deferred tax liabilities
Other assets and liabilities
Net assets
Retained earnings
Other capital and reserves
Total equity
As at 29 September 2018
Impact on the Group balance sheet
Derivative financial instruments – current liabilities
Derivative financial instruments – non-current liabilities
Deferred tax liabilities
Other assets and liabilities
Net assets
Retained earnings
Other capital and reserves
Total equity
As originally
stated
£m
(184.2)
(51.3)
(63.9)
1,110.5
1.811
36.9
774.2
1.811
As originally
stated
£m
(28.9)
(148.6)
(81.3)
1,216.4
957.6
147.6
810.0
957.6
Deferred tax
adjustment
£m
–
–
3.6
–
3.6
3.6
–
3.6
Deferred tax
adjustment
£m
–
–
3.6
–
3.6
3.6
–
3.6
Derivatives
adjustment
£m
164.3
(164.3)
–
–
–
–
–
–
Derivatives
adjustment
£m
14.3
(14.3)
–
–
–
–
–
–
Restated
amount
£m
(19.9)
(215.6)
(60.3)
1,110.5
814.7
40.5
774.2
814.7
Restated
amount
£m
(14.6)
(162.9)
(77.7)
1,216.4
961.2
151.2
810.0
961.2
Marston’s PLC Annual Report and Accounts 2020
129
36 Asset class split
In order to provide more reliable and relevant information in respect of its property assets the Group has split the land and buildings asset class within property,
plant and equipment into an effective freehold class and a leasehold class.
The effective freehold class comprises land and buildings which are either freehold or are in substance freehold assets. This includes leasehold land and
buildings with a term exceeding 100 years at acquisition/commencement of the lease or where there is an option to purchase the freehold at the end of the
lease term for a nominal amount. The leasehold class comprises all other leasehold land and buildings.
It is considered that the two groupings above comprise assets which have a different nature and use within the Group’s operations and as such it is appropriate
to classify them as separate asset classes under IAS 16 ‘Property, Plant and Equipment’. Leasehold assets derive their value solely from generating income over
the lease term and their use/development can be restricted, whereas with effective freehold assets there is additional value from the underlying property asset
(including alternative uses and development potential), the assets can be used as security and the value of the property asset is generally maintained over time.
It is considered that providing information separately for these two different classes will provide more reliable and relevant information.
The Group has adopted the revaluation model for the effective freehold class and the cost model for the leasehold class. The land and buildings asset class has
been held under the revaluation model and as such the measurement basis for assets in the leasehold class has changed. This has been treated as a change in
accounting policy and has been applied retrospectively in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ and as
such the comparatives for the 52 weeks ended 28 September 2019 have been restated.
The impact of this retrospective restatement on the Group income statement, Group statement of comprehensive income, Group cash flow statement, Group
balance sheet and loss per share for the 52 weeks ended 28 September 2019, and on the Group balance sheet as at 29 September 2018, has been set out
below. The adjustments, where applicable, are after the restatements detailed in note 35.
52 weeks ended 28 September 2019
Impact on the Group income statement
Revenue
Operating expenses
Operating profit
Net finance costs
Loss before taxation
Taxation
Loss for the period from continuing operations
Profit from discontinued operations
Loss for the period attributable to equity shareholders
Impact on the Group statement of comprehensive income
Loss for the period
Items of other comprehensive income that may subsequently 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
Items of other comprehensive income that will not be reclassified to profit or loss
Other comprehensive expense for the period
Total comprehensive expense for the period attributable to equity shareholders
As originally
stated
£m
1,173.5
(1,067.0)
106.5
(126.5)
(20.0)
2.0
(18.0)
–
(18.0)
Representation
of discontinued
operations
£m
(389.3)
363.8
(25.5)
0.9
(24.6)
4.9
(19.7)
19.7
–
As originally
stated
£m
(18.0)
(7.8)
(54.7)
2.8
(27.4)
1.11
(68.2)
(76.0)
(94.0)
Adjustment
£m
–
(0.1)
(0.1)
–
(0.1)
0.4
0.3
–
0.3
Adjustment
£m
0.3
–
–
–
2.3
(0.5)
1.8
1.8
2.1
Restated
amount
£m
784.2
(703.3)
80.9
(125.6)
(44.7)
7.3
(37.4)
19.7
(17.7)
Restated
amount
£m
(17.7)
(7.8)
(54.7)
2.8
(25.1)
10.6
(66.4)
(74.2)
(91.9)
Marston’s PLC Annual Report and Accounts 2020Financial Statements
130
Notes continued
For the 53 weeks ended 3 October 2020
36 Asset class split (continued)
Impact on the Group cash flow statement
Operating activities
Underlying operating profit
Depreciation and amortisation
Underlying EBITDA
Non-underlying operating items
EBITDA
Working capital movement
Non-cash movements
Decrease in provisions and other non-current liabilities
Difference between defined benefit pension contributions paid and amounts charged
Income tax paid
Net cash inflow from operating activities
Impact on the Group balance sheet
Property, plant and equipment
Deferred tax liabilities
Other assets and liabilities
Net assets
Revaluation reserve
Retained earnings
Other capital and reserves
Total equity
Impact on loss per share
Basic loss per share
Diluted loss per share
As at 29 September 2018
Impact on the Group balance sheet
Property, plant and equipment
Deferred tax liabilities
Other assets and liabilities
Net assets
Revaluation reserve
Retained earnings
Other capital and reserves
Total equity
As originally
stated
£m
Adjustment
£m
178.7
43.2
221.9
(72.2)
149.7
10.3
51.0
(3.4)
(3.0)
(9.0)
195.6
As stated
following
prior
period
adjustments
£m
2,350.4
(60.3)
(1,475.4)
814.7
598.9
40.5
175.3
814.7
As originally
stated
p
(2.8)
(2.8)
As stated
following
prior
period
adjustments
£m
2,408.1
(77.7)
(1,369.2)
961.2
627.2
151.2
182.8
961.2
(5.9)
(1.0)
(6.9)
5.8
(1.1)
–
1.1
–
–
–
–
Adjustment
£m
(44.3)
3.8
–
(40.5)
(25.5)
(15.0)
–
(40.5)
Adjustment
p
–
–
Adjustment
£m
(46.5)
3.9
–
(42.6)
(27.0)
(15.6)
–
(42.6)
Restated
amount
£m
172.8
42.2
215.0
(66.4)
148.6
10.3
52.1
(3.4)
(3.0)
(9.0)
195.6
Restated
amount
£m
2,306.1
(56.5)
(1,475.4)
774.2
573.4
25.5
175.3
774.2
Restated
amount
p
(2.8)
(2.8)
Restated
amount
£m
2,361.6
(73.8)
(1,369.2)
918.6
600.2
135.6
182.8
918.6
Marston’s PLC Annual Report and Accounts 2020
131
37 Adoption of IFRS 16 ‘Leases’
The Group has adopted IFRS 16 ‘Leases’ in the current period using the modified retrospective approach in paragraph C5(b) of the standard, whereby
comparative amounts have not been restated and the cumulative effect of initially applying the standard has been recognised as an adjustment to opening
retained earnings at 29 September 2019.
Impact on accounting policies
Details of the new accounting policies adopted under IFRS 16 are set out in note 1.
Impact on transition
For leases previously classified as operating leases under IAS 17 ‘Leases’ the lease liability at 29 September 2019 has been recognised at the present value of
the remaining lease payments discounted using the Group’s incremental borrowing rate at 29 September 2019. The Group has applied the practical expedient
in IFRS 16 to apply a single discount rate to a portfolio of leases with reasonably similar characteristics. The Group has taken the option to recognise all of the
associated right-of-use assets at their carrying amounts had IFRS 16 always been applied, discounted using the Group’s incremental borrowing rate at 29
September 2019, less any impairment required under IAS 36 ‘Impairment of Assets’.
For leases where the Group is the intermediate lessor the subleases have been reassessed at 29 September 2019 to determine whether the sublease should
be classified as a finance lease or an operating lease based on the remaining contractual terms and conditions of the head lease and sublease at that date.
Subleases that were classified as operating leases under IAS 17 but are required to be accounted for as finance leases under IFRS 16 have been treated as
new finance leases entered into at 29 September 2019 and a finance lease receivable has been recognised instead of a right-of-use asset. The finance lease
receivable has been recognised at the present value of the remaining lease payments discounted at the discount rate used for the head lease.
For leases previously classified as finance leases under IAS 17, the carrying amount of the lease liability and right-of-use asset at 29 September 2019 has been
taken as the carrying amount of the IAS 17 lease liability and lease asset immediately before that date. These liabilities and assets have subsequently been
accounted for by applying the requirements of IFRS 16.
The impact on the balance sheet upon transition to IFRS 16 at 29 September 2019 is as follows:
Other intangible assets
Property, plant and equipment
Finance lease receivables
Lease liabilities
Property lease provisions
Trade and other receivables/payables
Deferred tax
Total adjustment to opening retained earnings
The weighted average incremental borrowing rate applied to the lease liabilities recognised in the balance sheet at 29 September 2019 was 5%.
Operating lease commitments at 28 September 2019 as previously disclosed
Discounted using the incremental borrowing rate at 29 September 2019
Commitments relating to short-term leases and leases of low-value assets
Lease liabilities recognised in the balance sheet at 29 September 2019
38 Events after the balance sheet date
29 September
2019
£m
(0.7)
244.6
20.2
(295.3)
14.6
0.7
(15.9)
3.0
(12.9)
29 September
2019
£m
592.9
297.4
(2.1)
295.3
On 4 October 2020 the Group transferred its brewing operations into a wholly-owned subsidiary, Marston’s Beer Company Limited. On 30 October 2020
the Group sold Marston’s Beer Company Limited to Carlsberg Marston’s Brewing Company Limited in exchange for an initial cash receipt of £232.7 million
and a 40% shareholding in Carlsberg Marston’s Brewing Company Limited. The initial profit on disposal, excluding working capital adjustments and deferred
contingent consideration, is estimated to be around £280 million.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
132
Company Balance Sheet
As at 3 October 2020
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
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
Note
5
6
7
7
8
8
9
13
14
14
14
14
14
3 October
2020
£m
307.7
162.9
470.6
540.1
334.8
14.0
888.9
(756.2)
132.7
603.3
(180.2)
(8.4)
414.7
48.7
334.0
39.1
23.7
6.8
(111.9)
74.3
414.7
28 September
2019
(Restated)
£m
365.9
260.9
626.8
525.1
484.2
15.9
1,025.2
(730.5)
294.7
921.5
(160.2)
(16.0)
745.3
48.7
334.0
63.8
23.7
6.8
(112.0)
380.3
745.3
The comparative information for the 52 weeks ended 28 September 2019 has been restated for the prior period adjustments detailed in note 16 and the asset
class split detailed in note 17.
The loss of the Company for the 53 weeks ended 3 October 2020 was £277.3 million (2019 (restated): profit of £19.3 million).
The financial statements were approved by the Board and authorised for issue on 10 December 2020 and are signed on its behalf by:
Ralph Findlay
Chief Executive Officer
10 December 2020
Company registration number: 31461
Marston’s PLC Annual Report and Accounts 2020
Company Statement of Changes in Equity
For the 53 weeks ended 3 October 2020
At 30 September 2018 (as originally reported)
Subordinated loan adjustment
Deferred tax adjustment
Adjustment for asset class split
Tax impact of asset class split
At 30 September 2018 (as restated)
Profit for the period (as restated)
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 (as restated)
Loss for the period
Revaluation of properties
Deferred tax on properties
Total comprehensive expense
Share-based payments
Sale of own shares
Transfer to profit and loss reserves
Dividends paid
Total transactions with owners
At 3 October 2020
Equity
share
capital
£m
48.7
–
–
–
–
48.7
–
–
–
–
–
–
–
–
–
48.7
–
–
–
–
–
–
–
–
–
48.7
Share
premium
account
£m
334.0
–
–
–
–
334.0
–
–
–
–
–
–
–
–
–
334.0
–
–
–
–
–
–
–
–
–
334.0
Revaluation
reserve
(Restated)
£m
78.9
–
–
(11.0)
1.4
69.3
–
(2.1)
(2.9)
(5.0)
–
–
(0.5)
–
(0.5)
63.8
–
(26.7)
3.4
(23.3)
–
–
(1.4)
–
(1.4)
39.1
Merger
reserve
£m
23.7
–
–
–
–
23.7
–
–
–
–
–
–
–
–
–
23.7
–
–
–
–
–
–
–
–
–
23.7
Capital
redemption
reserve
£m
6.8
–
–
–
–
6.8
–
–
–
–
–
–
–
–
–
6.8
–
–
–
–
–
–
–
–
–
6.8
Profit
and loss
reserves
(Restated)
£m
935.6
(532.0)
3.6
0.8
(0.1)
407.9
19.3
–
–
19.3
0.3
(0.2)
0.5
(47.5)
(46.9)
380.3
(277.3)
–
–
(277.3)
0.4
(0.1)
1.4
(30.4)
(28.7)
74.3
Own
shares
£m
(112.3)
–
–
–
–
(112.3)
–
–
–
–
–
0.3
–
–
0.3
(112.0)
–
–
–
–
–
0.1
–
–
0.1
(111.9)
133
Total
equity
(Restated)
£m
1,315.4
(532.0)
3.6
(10.2)
1.3
778.1
19.3
(2.1)
(2.9)
14.3
0.3
0.1
–
(47.5)
(47.1)
745.3
(277.3)
(26.7)
3.4
(300.6)
0.4
–
–
(30.4)
(30.0)
414.7
Marston’s PLC Annual Report and Accounts 2020Financial Statements
134
Notes
For the 53 weeks ended 3 October 2020
1 Accounting policies
The Company’s principal accounting policies are set out below:
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 effective freehold land and buildings
and the holding of certain financial instruments at fair value.
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 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flows and related notes and disclosures;
• Section 11 ‘Basic Financial Instruments’ – Interest income/expense and net gains/losses for each category of financial instrument not measured at
fair value through profit or loss, impairment losses for each class of financial asset and information that enables users to evaluate the significance of
financial instruments;
• Section 26 ‘Share-based Payment’ – Reconciliation of the opening and closing number and weighted average exercise price of share options, how the fair
value of options granted was measured, and an explanation of modifications to arrangements;
• 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.
The Directors continue to adopt the going concern basis of accounting in preparing the financial statements. Details of the going concern assessment
performed by the Group are provided in note 1 to the Group financial statements.
Prior period adjustments
The Company has identified that the accounting treatment for the subordinated loan upon transition to FRS 102, for deferred tax recognised in respect of land
and buildings which are held under finance leases and for the split of derivative financial instruments between amounts falling due within one year and amounts
falling due after more than one year required adjustment. As such the comparatives for the 52 weeks ended 28 September 2019 have been restated in
accordance with Section 10 ‘Accounting Policies, Estimates and Errors’ of FRS 102. Full details are provided in note 16.
Asset class split
The Company has split the land and buildings asset class within tangible fixed assets into an effective freehold class, held under the revaluation model, and a
leasehold class, held under the cost model. This change has been applied retrospectively in accordance with Section 10 ‘Accounting Policies, Estimates and
Errors’ of FRS 102 and as such the comparatives for the 52 weeks ended 28 September 2019 have been restated. Full details are provided in note 17.
Turnover
Turnover represents rent receivable, which is recognised over time and 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.
Marston’s PLC Annual Report and Accounts 2020
135
1 Accounting policies (continued)
Fixed assets
• Effective freehold land and buildings are initially stated at cost and subsequently at valuation. Leasehold land and buildings and 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.
• Land and buildings are depreciated to their residual values over the lower of the lease term (where applicable) 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.
Effective freehold land and buildings are revalued by qualified valuers at least once in each rolling three year period, on an open market value basis. External
valuations are in accordance with the Royal Institution of Chartered Surveyors’ Red Book. These valuations are performed directly by reference to observable
prices in an active market or recent market transactions on arm’s length terms. Internal valuations are performed on the same basis.
When a valuation is below current carrying value, the asset concerned is reviewed for impairment. Impairment losses are charged to the revaluation reserve
to the extent that a previous gain has been recorded, and thereafter to the profit and loss account. Surpluses on revaluation are recognised in the revaluation
reserve, except to the extent they reverse previously charged impairment losses, in which case the reversal is recorded in the profit and loss account.
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.
The fair value of derivatives is split between amounts falling due within one year and amounts falling due after more than one year based on the remaining
maturity profile.
Marston’s PLC Annual Report and Accounts 2020Financial Statements
136
Notes continued
For the 53 weeks ended 3 October 2020
1 Accounting policies (continued)
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.
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.
Marston’s PLC Annual Report and Accounts 2020
137
2 Judgements and key sources of estimation uncertainty (continued)
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 effective freehold land and buildings 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 carrying amount of tangible fixed assets is shown in note 5.
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, analysis of credit
risk and yield curves.
The carrying amount of the interest rate swaps is shown in note 10.
3 Auditor’s remuneration
Fees payable to the Company’s Auditor 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 Auditor 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 was nil (2019: nil).
5 Tangible fixed assets
Cost or valuation
At 29 September 2019 (as originally reported)
Adjustment for asset class split
At 29 September 2019 (as restated)
Additions
Revaluation
Disposals
At 3 October 2020
Depreciation
At 29 September 2019 (as originally reported)
Adjustment for asset class split
At 29 September 2019 (as restated)
Charge for the period
Impairment
Disposals
At 3 October 2020
Net book amount at 28 September 2019 (as restated)
Net book amount at 3 October 2020
Effective
freehold
land and
buildings
£m
321.3
–
321.3
2.8
(47.3)
(9.5)
267.3
0.7
–
0.7
0.5
–
–
1.2
320.6
266.1
Leasehold
land and
buildings
£m
Fixtures,
fittings,
plant and
equipment
£m
28.9
3.8
32.7
0.7
–
(0.9)
32.5
2.3
13.6
15.9
1.2
1.5
(0.9)
17.7
16.8
14.8
46.2
–
46.2
2.0
–
(2.2)
46.0
17.7
–
17.7
3.7
–
(2.2)
19.2
28.5
26.8
Total
£m
396.4
3.8
400.2
5.5
(47.3)
(12.6)
345.8
20.7
13.6
34.3
5.4
1.5
(3.1)
38.1
365.9
307.7
Marston’s PLC Annual Report and Accounts 2020Financial Statements
138
Notes continued
For the 53 weeks ended 3 October 2020
5 Tangible fixed assets (continued)
The net book amount of land and buildings is split as follows:
Freehold land and buildings
Leasehold land and buildings with a term greater than 100 years at acquisition/commencement
Leasehold land and buildings with a term less than 100 years at acquisition/commencement
2020
£m
210.9
55.2
14.8
280.9
2019
(Restated)
£m
254.5
66.1
16.8
337.4
If the effective freehold land and buildings had not been revalued, the historical cost net book amount would be £220.2 million (2019 (restated):
£246.3 million).
Capital expenditure authorised and committed at the period end but not provided for in the financial statements was £0.2 million (2019: £0.4 million).
The net book amount of effective freehold land and buildings held under finance leases at 3 October 2020 was £18.4 million (2019: £25.5 million). The net
book amount of effective freehold 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 £94.0 million (2019: £120.6 million). The net book amount of fixtures, fittings, plant and equipment held under finance leases was £1.0 million
(2019: £0.5 million). The net book amount of fixtures, fittings, plant and equipment held as security for bank borrowings was £6.7 million (2019: £7.0 million).
The Company has charged effective freehold land and buildings with a value of £4.0 million (2019: £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 loss account as appropriate.
Profit and loss account:
Impairment
Reversal of past impairment
Revaluation reserve:
Reversal of past revaluation surplus
Net decrease in shareholders’ equity/tangible fixed assets
6 Fixed asset investments
Cost
At 29 September 2019
Capital contribution in respect of equity-settled share-based payments
At 3 October 2020
Impairments
At 29 September 2019
Charged in the period
At 3 October 2020
Net book amount at 28 September 2019
Net book amount at 3 October 2020
2020
£m
(22.1)
–
(22.1)
(26.7)
(26.7)
(48.8)
2019
(Restated)
£m
(8.5)
0.5
(8.0)
(2.1)
(2.1)
(10.1)
Subsidiary
undertakings
£m
261.7
0.4
262.1
0.8
98.4
99.2
260.9
162.9
Marston’s PLC Annual Report and Accounts 2020
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 3 October 2020:
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 Beer Company 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
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 £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%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
139
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%
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 Beer Company 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 Beer Company Limited is 22
Grenville Street, St Helier, Jersey, JE4 8PX. 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 2020Financial Statements
140
Notes continued
For the 53 weeks ended 3 October 2020
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
Derivative financial instruments
2020
£m
520.5
19.5
0.1
–
540.1
2020
£m
317.0
17.8
334.8
2019
(Restated)
£m
520.5
3.9
0.2
0.5
525.1
2019
(Restated)
£m
447.6
36.6
484.2
The gross contractual amount outstanding in respect of the subordinated loan was £1,163.0 million (2019: £1,049.8 million) and the accumulated impairment
losses were £846.0 million (2019: £602.2 million).
Included within derivative financial instruments falling due within one year is an amount of £2.3 million (2019: £3.9 million) which relates to interest rate swaps
with a maturity of greater than 12 months.
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
Other borrowings
Preference shares
Derivative financial instruments
Accruals and deferred income
Other creditors
2020
£m
698.6
1.0
0.9
(0.1)
25.4
19.5
10.9
756.2
2020
£m
2.3
20.5
88.2
40.0
0.1
17.8
10.8
0.5
180.2
2019
(Restated)
£m
707.8
1.0
0.6
(0.1)
9.4
3.9
7.9
730.5
2019
(Restated)
£m
3.0
20.4
88.1
–
0.1
36.6
5.11
0.5
160.2
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 £107.4 million (2019:
£107.6 million). Debts of £0.1 million (2019: £0.1 million) were repayable otherwise than by instalments after more than five years from the balance sheet date.
Included within derivative financial instruments falling due within one year is an amount of £2.3 million (2019: £3.9 million) which relates to interest rate swaps
with a maturity of greater than 12 months.
Marston’s PLC Annual Report and Accounts 2020
9 Provisions for liabilities
At 29 September 2019 (as originally reported)
Prior period adjustment
Adjustment for asset class split
At 29 September 2019 (as restated)
Provided in the period
Released in the period
Utilised in the period
Credited to profit or loss
Credited to other comprehensive income
At 3 October 2020
Deferred
tax
£m
17.2
(3.6)
(1.3)
12.3
–
–
–
(5.8)
(3.4)
3.1
Payments are expected to continue in respect of these property leases for periods of 1 to 24 years (2019: 1 to 25 years).
Deferred tax
The amount provided in respect of deferred tax is as follows:
Excess of capital allowances over accumulated depreciation
Property related items
Other
Property
leases
£m
3.7
–
–
3.7
2.4
(0.1)
(0.7)
–
–
5.3
2020
£m
5.2
3.1
(5.2)
3.1
A deferred tax asset of £2.6 million (2019: £nil) arising on capital losses has not been recognised due to uncertainty over its future recoverability.
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
2020
£m
37.3
2020
£m
37.3
141
Total
£m
20.9
(3.6)
(1.3)
16.0
2.4
(0.1)
(0.7)
(5.8)
(3.4)
8.4
2019
(Restated)
£m
6.1
6.2
–
12.3
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, adjusted for the
Company’s own credit risk. 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 3 October 2020 the Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases as follows:
Within one year
In more than one year but less than five years
In more than five years
2020
£m
9.9
25.0
70.0
104.9
2019
£m
7.0
25.0
71.9
103.9
Marston’s PLC Annual Report and Accounts 2020Financial Statements
142
Notes continued
For the 53 weeks ended 3 October 2020
12 Finance lease obligations
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:
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
14 Reserves
2020
£m
2.0
6.0
32.4
40.4
(19.0)
21.4
2019
£m
1.7
5.6
33.7
41.0
(20.0)
21.0
2020
2019
Number
m
660.4
Value
£m
48.7
Number
m
660.4
Value
£m
48.7
The share premium account comprises amounts in excess of nominal value received for the issue of shares less any transaction costs.
When effective freehold land and buildings 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 represented the difference between the nominal value
of the shares issued and the net proceeds received.
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 2020
143
16 Prior period adjustments
The Company has identified that the accounting treatment for the subordinated loan upon transition to FRS 102, for deferred tax recognised in respect of land
and buildings which are held under finance leases and for the split of derivative financial instruments between amounts falling due within one year and amounts
falling due after more than one year required adjustment. The appropriate accounting treatment has been applied by retrospective restatement in accordance
with Section 10 ‘Accounting Policies, Estimates and Errors’ of FRS 102.
The adjustment to the subordinated loan arose in respect of the determination of the carrying amount of the instrument on transition to FRS 102. When corrected,
the cumulative impact on opening profit and loss reserves at 30 September 2018 amounted to £532.0 million. The impact for the 52 weeks ended 28
September 2019 amounted to a write down of the instrument of £70.2 million and resulted in a total reduction to profit and loss reserves at 28 September
2019 of £602.2 million. The impact on net current assets at 28 September 2019 was a reduction of £602.2 million.
The adjustments to the presentation of derivative financial instruments impact the split between amounts falling due within one year and amounts falling due
after more than one year in respect of debtors and creditors as set out in the table below. The adjustments increase net current assets at 28 September 2019 by
£36.6 million.
The impact of these retrospective restatements on the balance sheet as at 28 September 2019 and the profit for the 52 weeks ended 28 September 2019 has
been set out below. The adjustments, where applicable, are before those made in respect of the asset class split detailed in note 17.
As at 28 September 2019
Impact on the balance sheet
Debtors: Amounts falling due within one year
Debtors: Amounts falling due after more than one year
Creditors: Amounts falling due within one year
Creditors: Amounts falling due after more than one year
Deferred tax liabilities
Other assets and liabilities
Net assets
Profit and loss reserves
Other capital and reserves
Total equity
52 weeks ended 28 September 2019
Profit for the period
As originally
stated
£m
561.7
1,049.8
(767.1)
(123.6)
(17.2)
648.8
1,352.4
978.6
373.8
1,352.4
As originally
stated
£m
89.4
Subordinated
loan
adjustment
£m
–
(602.2)
–
–
–
–
(602.2)
(602.2)
–
(602.2)
Subordinated
loan
adjustment
£m
(70.2)
Deferred tax
adjustment
£m
–
–
–
–
3.6
–
3.6
3.6
–
3.6
Derivatives
adjustment
£m
(36.6)
36.6
36.6
(36.6)
–
–
–
–
–
–
Restated
amount
£m
525.1
484.2
(730.5)
(160.2)
(13.6)
648.8
753.8
380.0
373.8
753.8
Deferred tax
adjustment
£m
–
Derivatives
adjustment
£m
–
Restated
amount
£m
19.2
Marston’s PLC Annual Report and Accounts 2020Financial Statements
144
Notes continued
For the 53 weeks ended 3 October 2020
17 Asset class split
In order to provide more reliable and relevant information in respect of its property assets the Company has split the land and buildings asset class within
tangible fixed assets into an effective freehold class and a leasehold class.
The effective freehold class comprises land and buildings which are either freehold or are in substance freehold assets. This includes leasehold land and
buildings with a term exceeding 100 years at acquisition/commencement of the lease or where there is an option to purchase the freehold at the end of the
lease term for a nominal amount. The leasehold class comprises all other leasehold land and buildings.
It is considered that the two groupings above comprise assets which have a different nature and use within the Company’s operations and as such it is
appropriate to classify them as separate asset classes under Section 17 ‘Property, Plant and Equipment’ of FRS 102. Leasehold assets derive their value solely
from generating income over the lease term and their use/development can be restricted, whereas with effective freehold assets there is additional value
from the underlying property asset (including alternative uses and development potential), the assets can be used as security and the value of the property
asset is generally maintained over time. It is considered that providing information separately for these two different classes will provide more reliable and
relevant information.
The Company has adopted the revaluation model for the effective freehold class and the cost model for the leasehold class. The land and buildings asset
class has been held under the revaluation model and as such the measurement basis for assets in the leasehold class has changed. This has been treated as a
change in accounting policy and has been applied retrospectively in accordance with Section 10 ‘Accounting Policies, Estimates and Errors’ of FRS 102 and
as such the comparatives for the 52 weeks ended 28 September 2019 have been restated.
The impact of this retrospective restatement on the balance sheet as at 28 September 2019 and the profit for the 52 weeks ended 28 September 2019 has
been set out below. The adjustments, where applicable, are after the restatements detailed in note 16.
As at 28 September 2019
Impact on the balance sheet
Tangible fixed assets
Deferred tax liabilities
Other assets and liabilities
Net assets
Revaluation reserve
Profit and loss reserves
Other capital and reserves
Total equity
52 weeks ended 28 September 2019
Profit for the period
18 Events after the balance sheet date
As stated
following
prior
period
adjustments
£m
375.7
(13.6)
391.7
753.8
72.6
380.0
301.2
753.8
As stated
following
prior
period
adjustments
£m
19.2
Adjustment
£m
(9.8)
1.3
–
(8.5)
(8.8)
0.3
–
(8.5)
Restated
amount
£m
365.9
(12.3)
391.7
745.3
63.8
380.3
301.2
745.3
Adjustment
£m
0.1
Restated
amount
£m
19.3
On 4 October 2020 the Company transferred its assets and liabilities associated with the Group’s brewing operations to Marston’s Beer Company Limited for
their net book amount of £83.5 million.
Marston’s PLC Annual Report and Accounts 2020
Marston s PLC Annual Report and Accounts 2020
’
145
Additional
Information
Information for Shareholders
Glossary
146
149
146
Information for Shareholders
Annual General Meeting (AGM)
The Company’s AGM will be held at 9.00am on 27 January 2021 at Marston’s Talent Academy, Summerfield Road, Wolverhampton WV1 4PR.
At the time of writing, government measures are in force restricting physical public gatherings, due to COVID-19. In view of these measures, and our
responsibility to protect the health and safety of our shareholders and employees, we are currently planning that our AGM in 2021 will be held as a closed
meeting and convened with the minimum quorum of shareholders (which will be facilitated by Marston’s management) in order to conduct the business of the
meeting. Therefore, we regret that shareholders will not be permitted to attend the meeting in person and, in the interests of safety, anyone seeking to attend in
person will be refused entry. We strongly encourage shareholders to vote by proxy on the resolutions set out in the Notice of Meeting.
Any changes to the AGM arrangements will be communicated to shareholders before the AGM through our website and, where appropriate, by
RNS announcement.
Online Voting for the Annual General Meeting
Although shareholders are not able to attend the meeting, shareholder participation remains important to us and we strongly encourage all shareholders to
participate in the business of the meeting by submitting your votes on each of the resolutions in advance.
To register the appointment of a proxy electronically, visit www.sharevote.co.uk and follow the instructions provided (you will need the voting numbers found
on your Form of Proxy).
Alternatively, shareholders who have already registered with Equiniti Registrars’ online portfolio service, Shareview, can appoint their proxy electronically by
logging on to their portfolio at www.shareview.co.uk using their user ID and password. Once logged in, click “view” on the “My Investments” page. Click on
the link to vote and follow the on-screen instructions.
Financial calendar
AGM and Interim Management Statement
Half-year results
Full-year results
These dates are indicative only and may be subject to change.
The Marston’s website
27 January 2021
May 2021
November 2021
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 9.00am to 5.00pm (UK time), Monday to Friday, excluding public holidays in England and Wales.
Dividend payments
As announced in May 2020, no dividends will be paid in the 2020 financial year. Future dividends will be reviewed.
However, if you believe you have any unclaimed dividends or have misplaced a cheque, please contact Equiniti or visit www.shareview.co.uk. 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.
Marston’s PLC Annual Report and Accounts 2020
147
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.
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+
Totals
Total number
of holdings
3,647
4,028
1,031
192
99
8,997
Percentage
of holders
40.54%
44.77%
11.46%
2.13%
1.10%
100.00%
Total number
of shares
1,525,355
15,613,363
26,619,682
65,868,529
550,735,265
660,362,194
Percentage
issued capital
0.23%
2.36%
4.03%
9.98%
83.40%
100.00%
An analysis of the register by shareholder type can be found in the Governance section on page 49.
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 2020Additional Information
148
Information for Shareholders continued
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
Auditor
KPMG LLP, One Snowhill, Snowhill Queensway, Birmingham B4 6GH
Advisers
JP Morgan Cazenove, 20 Moorgate, London EC2R 6DA
Peel Hunt LLP, Moor House, 120 London Wall, London EC2Y 5ET
Solicitors
Freshfield Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y 1HS
Pinsent Masons LLP, 55 Colmore Row, Birmingham B3 2FF
Slaughter & May LLP, One Burnhill Row, London EC1Y 8YY
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
Marston’s PLC Annual Report and Accounts 2020
Glossary
Anaphylaxis Campaign British charity that supports people at risk from
severe allergic reactions
Like-for-like Sales this year compared to sales in the previous year, of the
same 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
Capex Capital investment
MBC Marston’s Beer Company, internal division
Carlsberg/Carlsberg UK The Carlsberg Group’s UK brewing business
MRO Market rent only – as defined in The Pubs Code
CGA 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
CROCCE Cash Return on Cash Capital Employed – calculated in the same
way as ROC
CR Corporate Responsibility – businesses’ response to their impact on society
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
EHO Environmental Health Officer
EOHO Eat Out to Help Out Government initiative through August 2020
EPOS Electronic point of sale
EPS Earnings per share
ESG Environmental, Social and Governance
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
IRI Market research provider for consumer and retail insight
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
NAV Net asset value
NED Non-executive Director
NCF Net cash flow – Change in debt resulting from cash flows
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
Packaged Includes bottles and cans
PBT Profit before tax
PBA Premium bottled ale
PCA Pubs Code Adjudicator
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
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
The Pubs Code Statutory regulation effective 21 July 2016
TSR Total shareholder return – a combination of share price appreciation
and dividends paid
Kantar Data and insight consultancy
Total revenue Total revenue from continuing and discontinued operations
kW Kilowatt – a measure of electric power
Venture Pubs Tenanted and leased pubs
IGD Data and insight provider for food and grocery industry
Ways of Working Marston’s values and principles that guide our expected
behaviours and actions
WRAP Waste & Resources Action Programme
WTO World Trade Organisation
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Marston’s PLC
Marston’s House, Brewery Road,
Wolverhampton WV1 4JT
Telephone 01902 711811
Registered No. 31461