Strategic Report
Governance
Financial Statements
Additional Information
Pubs to be
proud of
Marston’s PLC Annual Report
and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Strategic Report
Governance
Financial Statements
Additional Information
Welcome back
to Marston’s…
Whilst COVID-19 has continued to occupy our time and attention during this reporting year, I’m keen to look
forward and focus on the future. Throughout the pandemic, our people have repeatedly demonstrated
great energy, commitment and resilience. Whilst our pub estate saw further closure periods, we took the
opportunity to ‘put our house in order’ and, as a result, we are emerging from the crisis as a stronger business.
We have redefined our vision ‘Pubs to be proud of’ with clearly defined targets and goals and an aspiration
to create a £1billion sales business. We have a passionate and dedicated team who are focused on delivering
the actions and hard work required to create a truly great pub business.
I’m delighted to have been appointed as Chief Executive Officer of Marston’s as we embark on our journey back
to growth. Our aim is clear: to deliver a great experience to all of our guests in pubs to be proud of. We are well
placed to take advantage of the opportunities and I’d like to welcome you to a stronger, more resilient Marston’s.
Andrew Andrea
Chief Executive Officer
01
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
A Snapshot of 2021
Total revenue
Total (loss)/profit before tax
Basic (loss)/earnings per share
Net cash flow
Underlying
Total*
2021
£423.8m
£(100.0)m
(13.4)p
£118.1m
2020
£821.0m
£(22.0)m
(1.7)p
£50.5m
2020
2021
£821.0m
£423.8m
£119.3m £(397.1)m
(56.8)p
£50.5m
25.7p
£118.1m
* The results above reflect the total performance of the Group including continuing and
discontinued operations. These results are detailed in the Group Income Statement on
page 85, in note 8 on page 104 and note 30 on page 124.
On a statutory basis revenue was £401.7m (2020: £515.5m) and loss before
tax was £(171.1)m (2020: £(388.7)m). This excludes discontinued operations
(see note 8 on page 104).
• The statutory profit before tax reflects the profit on disposal of the beer business of £291 million and a non-cash
impairment charge of £84 million for property.
• The financial performance for the period reflects the significant disruption to trading from the pandemic during
the period and the sale of Marston’s Beer Company to Carlsberg Marston‘s Brewing Company.
• The business has a strong balance sheet position. As at the balance sheet date, the Group had drawn down
£190 million of a £280 million bank facility providing headroom of £90 million.
• 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.
02
Improved trading post lockdown, sales levels
above 2019
Strengthened balance sheet; strong cash
management through pandemic
Carlsberg partnership completed 30 October 2020
Innovative transaction to operate SA Brain pubs
Clear strategy with clear targets
Net Zero commitment
Encouraging current trading, navigating
through headwinds
The Strategic Report, outlined from the inside front cover to page 45 incorporates:
Welcome back to Marston’s, A Snapshot of 2021, At a glance, Chair’s Statement,
Chief Executive’s Statement, Our Business Model, Our Strategy, Our Key Performance
Indicators, Group Operating and Financial Review, Risks and Risk Management,
Our Resources and Relationships, Non-Financial Information Statement and Section
172 (1) Statement.
By order of the Board
Andrew Andrea
Chief Executive Officer
30 November 2021
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Who we are
In this year’s report
We believe life is
better when shared
Our purpose is to bring people together for happy,
memorable, meaningful experiences. Where better to do
this than in the comfort of our pubs and bars.
We provide the perfect setting for every guest, every
community and every occasion, whether that’s meeting friends,
catching up with family, celebrating an anniversary or simply
popping in for a pint or a bite. It’s our great food, refreshing
drinks and welcoming environment that keeps our guests
coming back time and time again.
At the very heart of everything are our friendly, real and
empowered people who take pride in ensuring that every
single guest receives the warmest of welcomes and is made
to feel at home, valued and special.
Strategic Report
Welcome back to Marston’s
A Snapshot of 2021
At a glance
Chair’s Statement
Chief Executive’s Statement
Our Business Model
Our Strategy
Our Key Performance Indicators
Group Operating and Financial Review
Risks and Risk Management
Our Resources and Relationships
Non-Financial Information Statement
Section 172 (1) Statement
Governance
Chair’s Introduction
Board of Directors
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
1
2
4
5
6
9
10
17
19
22
32
44
45
47
48
50
54
57
59
73
75
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
77
85
86
87
88
90
92
128
129
130
139
141
Find out more online
For a full year-end press release, preliminary
results presentation and webcast, visit:
www.marstonspubs.co.uk/investors
03
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
At a glance
Marston’s has around 12,000
employees and a diverse estate
of pubs and bars that allows
us to offer something for every
guest, as well as contributing
to 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.
• Larger food-led managed pubs, premium bars and
restaurants, accommodation.
• Community pubs, either managed, franchised or
tenanted, often more wet-led in their format or offer.
• Independently run pubs by skilled entrepreneurs,
through market-leading partnerships that enable
them to grow their business and connect with
their communities.
• Majority of pubs in suburban locations, with 42 pubs
in city centres; less exposure to impact of COVID-19
on footfall in city centres.
• Our Pub Support Centre provides 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.
Key
Pubs and bars
Rooms
EV charging points
In city centre locations
Scotland
21
250
8
1
Pubs and bars
1,500
Rooms
1,836
City centre locations
42
Electric vehicle chargers
104
373
218
23
16
North of
England
623
489
31
10
248
364
9
7
Wales
Midlands
South of
England
235
515
33
8
04
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Chair’s Statement
A team to
be proud of
I would like to thank all
Marston’s team members
and pub partners for their
loyalty and support during
the closure periods and their
determination and efforts to
reopen our pubs in April.
William Rucker
Chair
05
The impact of the pandemic over the past 18 months has
been well-documented, with our business subjected to
mandatory closures and restrictions across the period
which is reflected in our 2021 financial results. We are
now focused on rebuilding our great pubs back to
pre-pandemic trading levels.
The success of our business is driven by our people.
I would like to thank all Marston’s team members and pub
partners for their loyalty and support during the closure
periods and their determination and efforts to reopen our
pubs in April.
I am also very grateful to the many stakeholders who
have supported us through the period, ranging from
Government providing swift economic support to our
sector, our financial backers who agreed to waivers and
concessions, and our suppliers who worked closely
alongside us. This demonstrates the strong regard with
which Marston’s is held with our long-term partners,
a reputation which was built well before the pandemic
and will be maintained thereafter. I should also like to
thank Marston’s loyal guests for their support when we
were able to reopen our doors and how delighted
we were to welcome them back.
Our partnership with Carlsberg, announced last year,
was an historic moment for Marston’s. Both teams are
driving an excellent integration process which will deliver
synergies significantly in excess of the £24 million
originally anticipated. Whilst we no longer directly
manage that business, we have a 40% stake in a market
leading UK beer business where the current carrying value
of £277.4 million excludes the value of future synergy
benefits. The equalisation payments received from the
transaction provided us with significant liquidity to navigate
the pandemic without recourse to equity fundraising.
This was a significant achievement and our current
borrowings position remains robust. Looking forward, I am
confident that the beer business will drive future growth.
Our pub estate reopened for outdoor trading on 12 April,
since then we have achieved sales at 94% of 2019 levels.
Our balanced portfolio, largely comprising nationwide
community pubs with limited exposure to London and city
centres, have supported this rapid return to trading. In our
view, the estate revaluation completed in July reflects the
current ongoing uncertainties, and we expect the carrying
value of property in the balance sheet to recover quickly
as sales return and grow beyond pre-pandemic levels.
will be remembered by many within the business and
across the industry.
During the lockdown period, Marston’s entered into
an agreement to operate the SA Brain pub estate.
This innovative transaction expanded our business in a
capital-light deal. In the future, we will consider similar
opportunities as they arise.
Our cash flow for the year was strong, evidencing a
£97 million reduction in net debt, excluding lease
liabilities, reflecting the CMBC equalisation payments
offset by the negative cash impact from trading restrictions.
We have strong cash headroom on our bank facility
which extends to 2024, and the remainder of our debt is
long-dated with no refinancing obligations. Importantly,
over 90% of our medium to long term debt is hedged
minimising any exposure to future potential interest rate
increases. It remains the case that the Group will need to
seek further banking covenant waivers in 2022.
Marston’s is now embarking on an exciting new chapter.
The Board was delighted to appoint Andrew Andrea as
Chief Executive Officer. He has clear drive, ambition and
outstanding execution skills and these attributes,
together with his deep knowledge of the business,
equip him well to lead Marston’s through the next stage
of its development. Hayleigh Lupino was appointed as
Chief Financial Officer to succeed Andrew. She has a
proven track record of delivery and is highly regarded
within the business which will stand her and the business
in good stead.
The PLC Executive Committee comprises a strong and
energetic blend of experience and diversity and has
recently been further strengthened with Mags Dixon
joining us as Commercial Marketing Director, who brings
significant sector experience.
I would also like to mention Ralph Findlay and David
Thompson. Ralph stood down from the business after
20 years as Chief Executive Officer. Throughout his tenure,
Ralph has shown his dedication, passion and ambition in
leading its people in a way that embodies Marston’s
unique culture and he will be greatly missed by his
colleagues and industry peers alike. David Thompson,
a former Managing Director and Chairman of the
business, sadly passed away after a long and brave
battle with cancer. David’s flamboyant style and intellect
Marston’s has a longstanding commitment to driving a
positive ESG agenda. We have developed a clear
roadmap to achieve Net Zero by 2030 for Scope 1 and
2 emissions and by 2040 for Scope 3. I am personally
excited by this plan and whilst the targets are challenging,
we are confident of meeting our commitment.
Given the significant disruption to trading in the financial
year under review and the potential for continuing
uncertainty, the Board has decided not to propose a
dividend in respect of financial year 2021. The Board is
cognisant of the importance of dividends to many of our
shareholders and we continue to review the timing of the
resumption of dividend payments in earnest.
During the year, we received an unsolicited approach
from a private equity bidder to acquire the Company at
105 pence per share, which the Board rejected on the
basis that it significantly undervalued the Company and its
prospects. Whilst the equity market remains cautious as
we emerge from the pandemic, our strategy to reduce
borrowings, restore trading momentum to pre-pandemic
levels and the value of our stake in our partnership with
Carlsberg, enhanced by the increased synergies, all offer
significant inherent shareholder value.
We continue to manage market pressures on inflation,
labour and product supply. Whilst the Government has
provided significant short term industry support, our key
request is for VAT to remain at 12.5% on food and soft
drinks for the longer term. A return of VAT to 20% in April
would be unwelcome, additional short-term pressure on
an industry working hard to get back to growth.
Looking forward, we have a corporate goal of ‘Back to a
billion‘, comprising an aspiration to drive sales above
£1billion and borrowings below £1billion by 2025.
With a new dynamic management team under new
leadership, we have clear plans to achieve those goals
which will, in turn, drive significant shareholder value.
William Rucker
Chair
30 November 2021
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
A business to be proud of
We were delighted to fully reopen our estate in July, once restrictions
were lifted, and welcome our guests and team members back into our pubs.
Marston’s emerged from the pandemic a stronger, more focused business
and we look to the future with renewed optimism.
Andrew Andrea
Chief Executive Officer
06
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Chief Executive’s Statement
We were delighted to fully
reopen our estate in July, once
restrictions were lifted, and
welcome our guests and team
members back into our pubs.
Whilst there are still some challenges to navigate over
the months ahead, we believe the worst of the pandemic
is now behind us and Marston’s has emerged a
stronger, more focused business which is in great shape.
Importantly, consumer demand for the pub and the role
which this great British institution plays, at the heart of
communities up and down the country, has never
been stronger.
Over the last 18 months, the Government provided much
welcomed support to the hospitality industry, which has
been so hard hit by the pandemic. We urge them to
continue to assist the sector as it continues its recovery
by maintaining VAT at 12.5%. Marston’s enters the year
ahead as a focused pub business with a clear strategic
plan, a profitable and cash generative business,
a strong balance sheet and a 40% share in CMBC,
our partnership with Carlsberg, which has such exciting
potential. Our debt reduction plans remain on track and
our well-invested, predominantly freehold, suburban pub
estate is well placed to benefit from many of the positive
consumer dynamics and drivers post pandemic.
2021 performance overview
The 2021 results were significantly impacted for a
second year by the COVID-19 pandemic, with severe
disruption to trading during the year as a direct result.
Our pubs were open for only 54% of the total trading
days in the period ended 2 October 2021 and when
they were permitted to open, they were mandated
to operate under significant trading restrictions due
to the Government’s response to the pandemic. These
restrictions ranged from outdoor only trading to table
service only, as well as numerous other variations
dependent upon the different tier systems in operation
across the UK.
Following the period of closure in the first half of the
year, we were able to trade outdoors from 12 April in
England and from 26 April in Scotland and Wales. On
reopening, it was clear that there was continued strong
demand from our guests for the pub and we have been
encouraged by the trading momentum experienced from
April onwards. We were pleased to be trading robustly
and above 2019 levels again from July in the later part
of the period under review.
During the December 2020 lockdown period, Marston’s
entered into an agreement to operate a portfolio of 147
pubs in Wales from SA Brain, under a combination of
leased and management contract arrangements.
Cash flow, financing and balance sheet
The Group remained focused on cash management
during the year, particularly during periods of closure.
We continued to prioritise cash preservation throughout
the disrupted trading period, but also maintained an
appropriate level of pub investment to ensure our pubs
were well positioned to recommence trading in April.
The Group generated a net cash inflow for the period of
£118 million, a £67 million improvement on 2020.
This improvement principally reflects £228 million of net
proceeds from the disposal of Marston‘s Beer Company
offset by the cash outflows arising from the periods of
pub closure.
During the year, we were successful in reaching
agreements with our lending banks and bondholders to
make appropriate amendments in respect of certain
financial covenants, and to provide waivers where
necessary. These included strong support from
bondholders for covenant waivers, with amendments in
place until January 2022 and the adoption of temporary
liquidity and profit covenants with banks and private
placement providers also to January 2022. 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, and we thank
them for their continued support. It remains the case that
the Group will need to seek further banking covenant
waivers in 2022.
07
The partnership between Carlsberg UK and Marston’s
Beer Company to form CMBC completed on
30 October 2020. On completion, we received net
proceeds of £228 million. In addition, we will receive
a payment of £28.2 million for the contingent
consideration which is planned to offset the one-off tax
repayment of £50 million in respect of VAT and duty,
delayed due to the first national lockdown in March
2020. Naturally, the prolonged periods of on-trade
closure and subsequent trading restrictions due to the
pandemic has impacted performance. Correspondingly,
and as previously stated, there will be no dividend
payable from CMBC in financial year 2021, although
we expect future dividends from CMBC to come through
following the reopening of pubs, the successful
integration and increased synergy benefits.
Marston’s has secure long-term financing in place.
Having satisfied the scheduled repayments for the
securitisation for quarters one, two and four,
demonstrating solid cash generation even under
significant trading restrictions, we drew upon the liquidity
facility to meet the April quarter-end principal and
interest payments. At the period close we had
£25 million of the £120 million securitisation liquidity
facility, with £5 million repaid in October 2021.
In summary, we have significant cash headroom in our
bank facility to provide operational liquidity, and a
securitisation liquidity facility to protect bondholder
payments for at least 12 months should that be required
in the event of any further unexpected interruptions to
trading. Importantly, over 90% of our medium to
long-term financing is hedged thereby minimising any
exposure to interest rate increases that may arise over
the next few years.
Innovative growth strategy
In our view, consolidation opportunities will remain
within the pub sector over the next few years and we
are continuing to consider ways in which we might
participate without compromising our objective to
reduce borrowings to below £1 billion. The SA Brain‘s
transaction was a good example of an innovative deal
which required minimal capital outlay to acquire the
operations of a high-quality pub estate. Looking forward,
it is our intention to review similar opportunities with the
strict criteria that any acquisitions must be underpinned
by strong earnings per pub and rental cover of at least
two times earnings. We have established an agreement
with property partners to work with us on opportunities
as they arise.
Carlsberg Marston’s Brewing Company
(CMBC)
Following the disposal of the brewing business into
CMBC we retain a 40% stake in a high-quality business
that is well placed for growth. Our partnership has
started well, and we are working with Carlsberg to
drive the business forward. The team have done an
outstanding job on integration and providing the
platform to drive the synergies identified in the original
process. As reported previously, we anticipate the
synergies are now expected to be in the range of
£35-40 million – significantly in excess of the £24 million
reported on completion.
The CMBC team are developing the sales and
marketing plans to drive the underlying business forwards
and maintain the market-leading position of both
businesses. We are encouraged by the plans presented
to us and are confident that these plans can drive further
growth in the coming years.
The carrying value of our shareholding is £277 million.
Importantly, this does not reflect either the synergies or
business progression referenced above which should
realise improving value looking forward.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Chief Executive’s Statement continued
ESG – roadmap to Net Zero
Marston’s has always maintained a proactive approach
to our ESG strategy. We view ESG as integral to our
operations and of increasing relevance to all of our
stakeholders; employees, suppliers, investors and most
importantly guests.
Our environmental team have won numerous awards,
most recently being awarded the food industry FEJ
Award for Energy Efficiency and Sustainability for the
third year in succession. Our achievements to date
are significant:
• First pub company to achieve zero waste to landfill
status, with a current recycling level of 78%
• All replaced plastic garden furniture is made from
100% recycled products
• Reduced carbon emissions, with all managed and
franchised pubs fitted with LED lighting
• We operate our own water licence, saving around
30 million pints of water per annum
In addition, we now have rapid charging points for
electric cars in over 100 of our pub car parks, one of the
largest private networks in the UK. In the last six months
we broke through the ‘one million miles sold‘ barrier from
our charging network and the roll out across our
estate continues.
During the year, we have identified the actions required
for our carbon Net Zero roadmap. Our internal remit is
to achieve the actions identified to meet our stated goals.
In October 2021, we signed up to the Zero Carbon
commitment to achieve Net Zero by 2030 for Scope 1
and 2 emissions (i.e. emissions directly under our control)
and 2040 for Scope 3 emissions (i.e. the emissions of
our suppliers).
08
Although there are many initiatives to reducing our
emissions, the majority of our roadmap to our 2030
(Scope 1 and 2) targets requires three specific actions:
• Move to renewable energy (April 2022)
• Investment in induction technology in our kitchens
(target by the end of 2026)
• Move to low carbon heating solution (target end
of 2030)
Looking forward, we believe the worst of the pandemic
is now behind us, albeit we will have to navigate through
the coming Winter months if any further Government
restrictions are put in place. Trading since April
demonstrates that demand to visit the pub remains strong
and we have clear plans in place to return Marston’s to
sustainable pre-pandemic levels of profitability, evolving
and adapting the business to ensure it is fit for long term
purpose and achieving our ‘Back to a billion‘ goals.
Andrew Andrea
Chief Executive Officer
By implementing these clear plans, in 2030 we
anticipate being in a position whereby we achieve a
90% reduction of our emissions goals for Scope 1 and 2
through identified actions with a 10% offset required to
become carbon neutral across Scope 1 and 2.
Current trading and outlook
Trading since the year end remains encouraging.
Total like-for-like sales in our managed and franchised
pubs are up 1.3% relative to 2019. October earnings
were in line with our expectations. Bookings for the
Christmas period are encouraging and building in
momentum. In our food-led business both Christmas Day
and Christmas Fayre bookings are in line with 2019,
albeit walk-in trade typically accounts for a significant
proportion of overall sales over the Christmas
trading period.
It has been well publicised that the wider industry is
facing challenges in respect of staff recruitment and cost
inflation, alongside supply issues. Whilst the labour
market remains tight, particularly in city centres, we are
currently managing this well. The national minimum wage
increase was in line with our expectation of a resumption
of the 5-6% increase, which we were observing before
the pandemic. The majority of our 2022 costs are now
contracted in, specifically gas to 2023 and electricity to
the end of March 2022. With regards to supply chain
challenges, we have seen some small pockets of
disruption however, we are continuing to work closely
with our suppliers to manage this.
Market dynamics
The pandemic has significantly changed the
dynamics of the market and our focus has been on
ensuring that our pub estate is optimally positioned
to meet those challenges and respond to evolving
consumer trends. There are four key dynamics of the
changing market, which we believe we are well
equipped to benefit from:
Our guests want to celebrate and socialise
outside home: Since reopening in April there is
clear evidence of a strong demand for guests to
socialise outside the home environment with
comparative sales performance improving steadily
as restrictions were relaxed further.
On-trade contraction of supply: In recent years
expansion in the eating-out market has been
relatively subdued. Supply has contracted
significantly during the year, particularly in casual
dining, and we expect this trend to continue for
the foreseeable future which presents a clear
opportunity for us to increase market share.
Lifestyle changes favour suburban locations:
The pandemic has significantly changed the way
in which we live and work, with a significant shift to
homeworking for example. Whilst we believe that a
return to office working will re-emerge in time, there
are strong indications that more flexible working
patterns will prevail in the long term, with many
large organisations looking to reduce office space
in city centre locations. Our principally suburban
estate is well-placed to exploit this change.
Experience replacing convenience as reason
to visit: In the years preceding the pandemic,
the eating-out market was subject to significant
discount activity. Today, options for eating at home
have significantly improved, with increased home
delivery options, the emergence of ‘finish at home‘
premium dining and the premiumisation of food
offers in supermarkets. As referenced above, there
is strong demand to socialise outside the home,
but the focus and expectation of our guests is driven
by experience and quality, rather than convenience
or price.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Business Model
Our purpose is to bring
people together to create
happy, memorable,
meaningful experiences.
Pubs are where we go to socialise, celebrate, share
an experience or simply enjoy a drink or bite to eat.
We sit at the heart of our local communities offering
a warm welcome to help people feel good.
As a people-powered business the way we do things
is core to how we achieve our purpose:
• By being obsessed about our guests’ experience,
always listening to the information around us and
caring with a passion about the guest; by keeping the
guest at the heart of every single decision we make.
• By raising the bar through working together to
determine the best course of action, sticking to it and
being accountable for it; by being committed to each
other, our teams and to bringing the best version of
ourselves to work.
• By always looking for ways to improve, ways to
exceed expectations and be better at what we do;
by never settling for average but looking for the right
moments to be bold, take a risk or call things out;
by encouraging each other to develop and celebrate
everyone’s uniqueness and the contribution each of
us can make.
See pages 32 to 43 for more information on
Our Resources and Relationships.
09
What we rely on
What we do
Value created
Relationships
The best people
Happy guests
Committed partners
Trusted suppliers
Supportive Government
Engaged communities
Our business relies on the strength of
the relationships with our key
stakeholders to maximise the value we
can generate together, for our
respective businesses, in a responsible
and financially prudent manner.
Resources
Sustainable approach
We recognise our responsibilities in
building a sustainable business that
minimises its impact on the environment.
We are Guest Obsessed
• Providing spaces for occasions
• Creating community living rooms
• Offering something for everyone
• Investing in outdoor spaces to relax
and enjoy
We Raise the Bar
• Offering market-leading partnerships
and a variety of operating models
• To attract the best people
• To maximise the returns from
each pub
• To offer genuine business
opportunities to our partners
We will Grow
• Responsible and innovative use of
resources and innovation to reduce
our environmental impact and
contribute to green spaces
• Unique partnership with a best in
class beer business to offer a wide
range of premium, global and
local brands
• Engaged teams who are invested
in our vision, feel valued and take
pride in ensuring our guests have
a great experience
• Attracting and retaining talented
people who reflect our values and
drive our ambitions to grow
• Great guest experiences means
repeat visits, recommendations and
increased spend per head
• Mutually beneficial relationships
with our partners and suppliers that
grows both businesses
• A well-managed estate of high-
quality pubs that are attractive to
guests and maximise their value
• Social hubs and attractive spaces
for communities
• Local sources of employment
• Builds confidence and legitimacy
in our ESG credentials as well as
enhancing reputation, helping to
differentiate us from our competitors
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Strategy
As a focused pub operator,
we have simplified our
structures and adopted a one-
team approach across our
business, working better and
smarter, to deliver our vision
of pubs to be proud of.
We have developed a clear guest-focused pub
strategy with a roadmap to deliver our core pub
goals, our corporate goals and our financial
strategy which will ultimately deliver
shareholder value.
We will measure ‘Better than the rest’ by being the
best pub locally when comparing our social scores
and by consistently outperforming the market.
Once we have achieved this we will work tirelessly
to stay there.
Our financial target of ‘Back to a billion’ will drive
shareholder value by growing earnings to above
£1billion and reducing borrowings to below
£1billion within 5 years.
10
Marston’s PLC Annual Report and Accounts 2021
Core
pub
goals
Core
corporate
goals
Pubs to be proud of
Loved by guests: All of our pubs Social 4* or more
Trusted: All of our pubs to be 5* EHO
Great place to work: Glassdoor 4* or more
Sales culture: Maximise sales per guest visit
‘Better than the rest‘: Consistent market outperformance in both food and wet
‘Back to a billion‘: An aspirational business – £1billion sales by 2025
Committed to being a responsible and sustainable business
We are Guest Obsessed
We Raise the Bar
We will Grow
Strategic
priorities
Start with guest
Experience not convenience
Focus on peak periods
Operational excellence
People investment
‘Make Great‘ sessions
High returning growth capex
Development of partnership
agreements
Sales culture – reward
outperformance
Exploit M&A opportunities
Financial strategy driving shareholder value
Financial
outputs
Grow earnings
Progressive and sustainable dividend
Reduced debt
Debt: equity transfer
Increased returns
Increased NAV
Strategic Report
Governance
Financial Statements
Additional Information
Our Strategy continued
Strategic and operational review
Following the sale of Marston’s Beer Company into
CMBC, we have become a focused pub operator for
the first time in the Group’s long history.
During the year we launched our new vision ‘Pubs to be
proud of’ with a purpose ‘to bring people together, to
create happy, memorable, meaningful experiences’.
This vision embodies our cultural DNA of being a pub
operator, whilst focusing on consistently delivering high
levels of guest satisfaction and standards through our
great pub teams.
Underpinning this vision are clear operational targets
which will be measured by external guest and employee
led endorsements such as Google, EHO and Glassdoor,
together with sales targets aimed at further improving
spend per guest visit.
Our corporate goals
The corporate goals underpinning the vision are twofold:
‘Better than the rest‘: Continued outperformance of
the Peach market tracker in both food-led and wet-led
pubs outside the M25
‘Back to a billion‘: This encompasses two financial
targets, namely:
• Achieving sales of £1 billion by 2025 – this requires
around £200 million of sales growth from the
pre-pandemic levels, including SA Brain over the
next four years.
• Reducing net debt to below £1 billion by 2025 –
this is consistent with our previously stated
financial strategy.
In delivering these goals we will drive shareholder value
on several fronts:
• Organic sales and earnings growth: by growing sales
and earnings beyond pre-pandemic levels we are
driving cash flow growth that can be deployed to
reinvest in the business, continue to pay down debt
and resume sustainable and progressive dividends.
• Capital allocation: adopting a capital allocation
policy that focuses on paying down debt, resuming
sustainable dividends and considering earnings
enhancing, capital-light acquisitions.
• Improve asset value and return on capital: over the
last two years our property value has been impaired
by around £350 million, reflecting the impact of the
pandemic. Our organic growth plans provide an
opportunity to restore the impaired value as well as
improving return on capital.
• Committed to be a responsible and sustainable
business: achieving our roadmap to Net Zero for
Scope 1, 2 and 3 emissions alongside creating
champion targets for key ESG issues relevant to
our business.
How we will deliver our goals
Focused and balanced leadership team
In order to deliver our goals, we have structurally
changed the PLC Executive team (PLC Exec) to ensure
decisions are made in a timely and efficient manner,
with close alignment between executive members and
minimal layers between the PLC Exec and pub teams.
Together with the Chief Executive and Chief Financial
Officer, the Group’s Executive comprises two Operations
Directors, a Commercial Marketing Director, Group HR
Director and Group Secretary. Of particular note, our
Commercial Marketing Director, Mags Dixon, joined the
Group in September 2021 and brings with her a wide
range of sector experience with a number of leading
hospitality brands.
11
1. We are Guest Obsessed
Ensuring that our guests are at
the heart of all of our decisions
and everything we do.
Insight and data driven decisions
In October we launched a new guest insight platform,
Reputation, which generates a Reputation score for
every pub based on social media feedback, regardless
of operating model. This platform highlights guest
satisfaction levels and also enables us to compare
each pub to local competitors. As such, it provides us
with a basis from which we can determine whether we
are the best pub in the area or where there is scope for
further improvement.
Following the investment in our EPOS system we have
a rich pool of data from which we can understand our
guest behaviours by each day and daypart in the week.
This enables us to make more targeted commercial
decisions which, together with the social media and
demographic data, ensures we have the right customer
offer in all of our pubs.
Creating memorable experiences
Prior to the pandemic, the food-led business was
exposed to significant discounting across the market
and, as such, the market was very price focused.
Since reopening, this balance has shifted, with guests
placing more emphasis on the overall pub experience,
with ambience and quality of service ranking far higher
in guest satisfaction surveys. Quality of food and drink is
of course critical but is taken as a given by our guests
and, whilst the insight shows that price is less important in
choosing a venue, we are cognisant that pubs must
remain an affordable treat where visit frequency is more
than once a month.
Focus on the peak periods;
minimise distraction
Coming out of the pandemic, footfall levels are still
below 2019. We are focused on maximising sales in
the key peak trading periods, namely lunchtime and
evening and believe greatest value is created by
harnessing our efforts and allocating resource to the
dayparts of the week when guests are most likely to visit.
As a consequence, we have taken the decision to restrict
where we are serving breakfast principally to pubs with
accommodation and we no longer offer delivery.
Whilst the door is not closed to these opportunities in
the future, our experience thus far is that these have
delivered negligible profit contributions and are a
distraction to the pubs‘ core business.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Strategy continued
In a continued effort to help get pubs ready ahead of the reopening
on 12 April, our estates and operations teams launched a nationwide
project to help equip pubs with alternative outdoor spaces to safely
welcome back guests. The pandemic accelerated trends whereby outdoor
areas are becoming a key focus for guests, for meeting with friends and
family in a safe environment. This was further evidenced following the
Government’s announcements regarding the roadmap out of lockdown for
England, when pubs were only able to serve guests exclusively outdoors.
Our pubs had to adapt and adjust their operations drastically to adhere
to guidelines and prepare for reopening. Each outdoor design was
carefully considered, utilising available space and how the area could
be used to ensure operations and guest experiences were enhanced,
whilst adhering to social distancing measures. Working closely with our
contractors and suppliers, we have completed no less than 320 projects
across our estate so far. We carried out some major refurbishments on
pubs during the lockdown, transforming them to be ready in time for
the reopening. From marquees and awnings to jumbrellas and teepees,
we were busy investing in creating ‘inside-out’ areas to offer our guests
options, while abiding by COVID-19 restrictions at the time.
See page 37 to see the spaces we are proud of.
12
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Strategy continued
2. We Raise the Bar
Focusing on ensuring
we raise our standards in
everything we do and are driven
by continuous improvement.
Our legacy annual review cycle has been replaced
by a more agile, regular monthly conversation with a
continuous focus on performance and personal
development. We are developing an app-based system
to ensure this process is efficient and not cumbersome
for our people or their managers.
Communication and engagement: The pandemic
reinforced the paramount importance of regular and
effective communication with our teams. We have
introduced the Peakon engagement system this year
which provides a platform for quick and regular
feedback to and from our people.
Operational excellence
We aspire to achieve the goals underpinning the vision
in all of our pubs. In addition to providing excellent guest
experiences evidenced through the satisfaction scores,
we are focused on ensuring that the guest experience is
delivered in pubs by operating to the appropriate
standards with a clear target EHO score. We have
launched a standards drive across our pubs with a new
audit app, and have included health and safety scores in
bonus schemes for the first time this year.
Focused improvement – ‘Make Great‘
In tandem with the focus on peak trading sessions,
we have launched an internal initiative ‘Make Great‘.
The first initiative was ‘Make Sundays Great‘. We set up
a cross functional project team to review and enhance
the whole Sunday guest experience, resulting in
simplified menus, improved specification of the roast
meal, marketing campaign and a trade-up incentive
scheme. The initial results are extremely encouraging,
with improved lunchtime trading results, higher guest
satisfaction and a higher mix of roast dinners, with most
food-led formats showing an improvement of nearly
20% relative to 2019.
We have extended ‘Make Great‘ to our capex
process as described below and have set up new
teams to enhance other key trading initiatives such as
‘Steak Night‘ and Saturday evenings in food-led pubs.
Investing in people
We employ nearly 12,000 people directly in our
561 managed pubs and an estimated 10,000 indirectly
in our 940 franchise and leased pubs. Our people are
at the heart of creating a ‘Pub to be proud of‘ and
engaging and investing in our teams to help them
improve the performance is critical to our success.
The pandemic presented an opportunity to review all
aspects of our people agenda.
Resourcing: The challenge for recruiting quality talent
into our business has been more pronounced as we
emerged from the pandemic, during a period which has
seen widely reported labour shortages in the hospitality
sector. During the various periods of lockdown, we
developed and relaunched our recruitment websites
and are reviewing the role of app based recruitment
systems for employees seeking more flexible working
arrangements. However, we recognise that we need to
evolve our processes further to ensure we are bringing
the right calibre of individual into the business for the
long term rather than simply filling pub vacancies to
meet short-term pressures. We have recently appointed
a new Head of Resourcing with significant sector
experience to oversee the continued evolution and
development of our recruitment agenda.
Training and development: We have introduced a
more agile and dynamic training and development
agenda into Marston‘s, to ensure we can identify
development needs quickly and offer innovative
training solutions.
13
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Strategy continued
After a successful eight week trial, we have signed a three year
contract with Attensi to provide a gamified training platform to
team members. In the Spring, we launched our ‘Marston’s Skills’
platform on Attensi, that allows for active, engaged learning.
The learning is divided into modules that are easily accessed on
a mobile phone, it is both fun and repetitious, very well suited to
teams and an excellent supplement to our other online courses.
It allows team members to track and improve their knowledge,
and to compare with others and ‘battle’ between each other.
Since the launch, 9,000 team members have completed
training on ‘Marston’s Skills’ and over 10,000 ‘battles’ were
played. 90% of our employees have confirmed that they prefer
this method of training compared to other more traditional
approaches. Our trials found a direct correlation between those
who had engaged and completed the gamified learning and an
increase of up to 5% at pub level in our Overall Guest
Satisfaction Score (OSAT).
Next year we will be releasing a 15-minute module every month
to all of our employees, to support our business strategy and
help our people grow, with a view to tackle topics such as
Christmas, food quality, guest service, allergens and inclusion.
We truly believe this offers a learning solution fit for all of
our employees.
14
Marston s PLC Annual Report and Accounts 2021
’
Strategic Report
Governance
Financial Statements
Additional Information
Our Strategy continued
3. We will Grow
Focusing on the actions that will
drive the £1 billion sales target.
Evolution of our estate
In response to the changing market dynamics post
pandemic, we have conducted a detailed review of our
pub estate. Following this review, we have decided to
categorise our pubs into three core trading formats in our
food business to reflect changing consumer trends,
thereby reducing our exposure to a pure mainstream
offer synonymous with discounting and a focus on price
over experience, and maximise the trading opportunity
in each pub. Importantly, consistency remains key across
all formats. Conversion of the estate to these categories
will take place over the next four years.
15
Community: These are good value, local pubs at the
heart of their community. We have both food-led and
wet-led pubs in this category. We are unlocking growth
through zoning that clearly defines the bar and dining
areas of the pub. Where we have adopted this model
we have seen growth from increased drinks volume
whilst continuing to deliver strong food sales.
Signature: In this format we elevate the everyday for
our guests, placing an emphasis on a warm, timeless
country-pub atmosphere with food and drink
provenance at the fore. We target a frequency
of 1–2 visits per month, in suburban towns and villages
where quality of food, a friendly welcome and familiarity
are key drivers.
Revere: Our most aspirational offer. Guests visiting these
pubs have a higher level of disposable income, are
well-travelled, eat out frequently and are willing to pay
for an elevated experience. In addition, a Signature
guest will trade up to a Revere pub or bar for a
special occasion.
Underpinning this is the ‘Make Capex Great‘
programme which has focused the capex process
as follows:
• Set long term sales and profit aspirations for the pub
and assess the capex investment based on this rather
than the incremental return on investment
• Enhanced marketing support for the first 12 weeks
after reopening for new launches
• Early identification of conversion sites to ensure all
resourcing and marketing requirements are addressed
prior to the capex investment. 25 conversion sites are
planned for 2022 and 50 conversion sites have been
identified for financial year 2023.
It is our intention to invest around £50-55 million of
capital over the next four years to complete the
programme at a minimum target return of 30%.
A good example of the type of investments we are
targeting is the Bankfield Inn, Bilston. The Bankfield was
a carvery site (previous name White Rabbit) with
average net sales of £15k per week, comprising £4k
of drink sales. We converted the pub to Marston‘s
Community trading format in May 2021 with an
investment of £250k and the pub is now consistently
trading at £21k per week with drink sales of £10k.
The proforma EBITDA of the pub is targeted at £230k
based on current sales.
Continued evolution of franchise –
Pillar agreement
In 2009, Marston’s pioneered the introduction of
franchise-style agreements which have subsequently
become widespread across the pub sector. We believe
that the franchise operating model in community pubs
creates the best experience for our guests as well
as being the most flexible and attractive model
for licensees.
Our aspiration is to continue to roll out turnover-based
agreements across our leased estate. The progress to
date has been restricted to pubs that can accommodate
a Marston’s food menu and therefore implementation
of such arrangements for a leased pub with an
independent food offer has proved challenging.
In 2021 we introduced a new franchise agreement
‘Pillar‘ which meets those challenges.
The Pillar agreement enables a partner to operate
their own menu through our EPOS system. As with the
franchise model, the operating costs of the pubs
excluding labour are borne by Marston’s ensuring the
pub is operating on national managed house cost terms.
Having successfully trialled the new agreement in
32 sites, we now plan to roll out this highly innovative
agreement to at least another 30 pubs in 2022.
This unique model enables food entrepreneurs amongst
our tenants and lessees to participate in the Marston’s
franchise agreement without compromising their
personal creativity.
Economically, the pilot has demonstrated that the
combination of food entrepreneurial flair from the
licensee, together with Marston’s drink expertise and
cost efficiencies, drives a high level of outlet profit which
is mutually beneficial to both parties.
Creating a stronger sales culture –
Project Boost
Our objective is to create a more entrepreneurial culture
across the organisation, rewarding outperformance
wherever that is achieved. This initiative is designed to
provide incentives to our strongest performers across the
business including our partnership sites.
Boost is also intended to ensure we are delivering our
financial results in the correct manner – satisfaction and
standards are embedded into all of our schemes across
the organisation. In 2022, our operational bonuses are
uncapped – if a pub significantly outperforms their
targets then they will be rewarded accordingly.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Strategy continued
As our business started to reopen after the first lockdown, we recognised that
applicants for our pubs were looking for something different. We identified an
opportunity to develop a new style of partnership agreement, which moves away
from rent and towards a turnover-share style of arrangement. This turnover-share
agreement allows our operating partners to have the freedom to implement their
own food offer and guest journey but with the support of Marston’s. Moving away
from the traditional style agreement moves us to a sales focused relationship where
we collaborate in partnership to grow the income and improve the experience for
the guest. This style of agreement is enabling us to attract applicants that may not
have considered a more traditional tenancy agreement.
“It works for me and my business in a number
of different ways, first and foremost it’s a very
fair and equitable revenue share. What Marston’s
have done, and I think it’s the right thing to do
within the industry, is take away the fixed costs
of rent, maintenance, utilities – which is a
really huge cost.
What they have done is released me just to be
an operator to actually sell beer, sell wine,
operate and deliver great service to customers,
and deliver my own great food to customers."
Adam Ellis, Blenheim House, Derby
16
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Key Performance Indicators
Our KPIs represent the
principal metrics that we
focus on in running our
guest obsessed business.
They measure our progress
in raising the bar on our
performance and in growing
the business. They also
help determine how we
are remunerated.
Our corporate goals are:
• To consistently outperform the market in both food-led
and wet-led pubs outside the M25, as defined by the
Peach market tracker.
• To get back to £1billion sales and £1billion
borrowings by 2025.
• To continue being a responsible and
sustainable business.
Our core pub goals are:
• To be the local choice for our guests and for them
to be our advocates.
• To operate to the highest standards of compliance
when dealing with the health and safety of our guests
and our people.
• To be a great place to work; engaging with and
enabling our people.
• To instill a sales culture within our teams; maximising
the spend per guest visit.
Loved by Guests
% of pubs with >4* Google rating
Great place to work
Glassdoor rating
Engagement score
Back to a billion
Total revenue (£m)
71%
Target: 100%
3.6
7.9
Target: 4
Target: 9
Previously, we have used a combination of internal guest satisfaction
surveys and feedback. For 2020/21 we have used external rating data
from Google only. From 2021/22 we will be using Reputation.com,
which incorporates Google.
During 2020/21 we moved to a different external platform to measure
and engage with our people and, for the first time, we also started
measuring our endorsement externally.
423.8
2021
2020
2019
821.0
1,173.5
Trusted
% of pubs with 5*EHO score
Sales culture
Spend per head v LY %
Net debt (excluding lease liabilities) (£m)
77.4%
70.3%
66.9%
2021
Target: 100%
2020
2019
2021
2020
9.9
12.3
2021
2020
2019
1,232
1,329
1,377
Committed to be a responsible
and sustainable business
FTSE4Good ESG score
Better than the rest
Sales growth vs Peach market tracker %
Free cash flow (FCF) (£m)
3.0
3.3
2021
2020
Net Zero emissions targets
Scope 1 and 2 – 2030
Scope 3 – 2040
2021
2020
2019
2.7
2019
(5.3)
2021
(61.0)
0.9
7.0
2020
2019
67.0
120.6
See page 21 for how FCF is calculated.
From 2021/22 we will report progress against out roadmap to Net Zero.
17
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Financial management to be proud of
Despite the trading challenges, the Group remained
focused on cash management during the year.
Hayleigh Lupino
Chief Financial Officer
18
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Operating and Financial Review
Group performance
Total revenue for the 52 weeks ending 2 October 2021
was £424 million, 48% below last year. The prior year
comparatives are for a 53-week period and included
Marston’s Beer Company. The Carlsberg Marston’s
Brewing Company (CMBC) partnership with Carlsberg
completed at the end of October 2020 and, therefore,
total revenue included one month‘s contribution from the
beer business. Total pub revenue for the year was
£402 million, 22% below last year, reflecting the
significant disruption to trading as a consequence of
the pandemic.
During the first half of the year pubs were trading under
significant restrictions or closed. In the second half year,
pubs were permitted to reopen initially for outdoor
trading during April and, subsequently, indoor trading
was permitted across all of the Group’s pub estate from
17 May, albeit subject to the continuance of various
social distancing restrictions until 19 July. We were able
to open c70% of our pubs under outdoor trading
restrictions from 12 April and the Group’s entire estate
of c1,500 pubs has been open since 17 May.
Since reopening on 12 April, we have seen an
improving sales trend from 77% of 2019 levels on a like-
for-like basis, during the period of outdoor trading only
to a return to growth over 2019 levels, with sales 2%
higher across our managed and franchised pubs from
July. Overall, trading since 12 April has been at 94% of
2019 levels which includes the benefit of the temporary
VAT reduction on food and non-alcoholic drink sales.
The Group’s £2 million investment in ‘inside-out‘
schemes, the investment plan for outdoor areas,
during Autumn and Winter 2020 supported our sales
performance during the outdoor only trading period,
which also benefitted from warmer weather and the
uplift from the delayed Euro 2020 tournament until
full reopening in July.
Accommodation sales have been very strong in the
period since reopening and benefitted from the demand
for UK staycations. Since fully reopening in July, these
have been 38% higher than 2019.
19
During the period we agreed to run the pub operations
of SA Brain in Wales, with the transaction completing
on 5 April 2021. These pubs were also impacted by the
significant disruption from the pandemic. These pubs
reopened alongside the existing Marston’s pub estate in
Wales initially for outdoor trading only from 26 April
and were fully open from July. Encouragingly, the SA
Brain pubs have performed well and are trading ahead
of expectations. The transaction is accounted for
predominantly under IFRS 16 leases.
The financial consequences of significant disruption
caused by the pandemic during the period, which
included full closure of pubs, outdoor trading only and
table service only, are reflected in significantly reduced
profit. Underlying EBITDA was £35.3 million
(2020: £125.6 million)1, and the total underlying
operating loss was £7.4 million (2020: £74.0 million
profit)1. The total underlying loss before tax was
£100.0 million (2020: £22.0 million)2. The basic
underlying loss per share for the period was 13.4 pence
per share (2020: 1.7 pence per share).
During the period the business accessed Government
support in the form of the Coronavirus Job Retention
Scheme (£43.6 million) and COVID-19 assistance
grants (£10.9 million) alongside the VAT reduction and
business rate relief.
The total profit before tax was £119.3 million
(2020: £397.1 million loss) including discontinued
operations, and earnings per share were 25.7 pence
per share (2020: 56.8 pence per share loss).
The difference between underlying profit before tax and
profit before tax is £219.3 million of non-underlying
items, of which £291 million relates to the disposal of
the beer business into CMBC.
The performance of the Group is assessed using several
alternative performance measures which are all derived
from the statutory figures as presented in the financial
statements as set out on page 21.
Cash flow, financing and balance sheet
Despite the trading challenges, the Group remained
focused on cash management during the year,
particularly during periods of closure. We continued to
prioritise cash preservation throughout the disrupted
trading period, but also maintained an appropriate level
of pub investment to ensure our pubs were well
positioned to recommence trading in April. The Group
generated a net cash inflow for the period of
£118 million³, a £67 million improvement on 2020.
This improvement principally reflects £228 million of net
proceeds from the disposal of Marston‘s Beer Company
offset by the cash outflows arising from the periods of
pub closure.
Net debt, excluding IFRS 16 lease commitments, was
£1,232 million (2020: £1,329 million)3, with the
decrease driven by the cash flows described above.
Total net debt of £1,604 million includes lease
obligations of £372 million following the adoption of
IFRS 16.
The increase in IFRS 16 obligations primarily reflects
the impact of the transaction to acquire the SA Brain
pub operations.
We have secure medium-term financing in place.
At the period end we had a £280 million bank facility
available until 2024, of which £190 million was drawn
providing headroom of £90 million. In addition, we have
a £40 million private placement available until 2024.
During the year, we were successful in reaching
agreements with our lending banks and bondholders
to make appropriate amendments in respect of certain
financial covenants, and to provide waivers where
necessary. These included strong support from
bondholders for covenant waivers and amendments
in place until January 2022, and the adoption of
temporary liquidity and profit covenants with banks and
private placement providers also to January 2022.
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, and we thank
them for their continued support. It remains the case that
the Group will need to seek further banking covenant
waivers in 2022.
The partnership between Carlsberg UK and Marston’s
Beer Company to form CMBC completed on
30 October 2020. On completion, we received net
proceeds of £228 million. In addition, we will receive
a payment of £28.2 million for the contingent
consideration which is planned to offset the one-off tax
repayment of £50 million in respect of VAT and duty,
delayed due to the first national lockdown in March
2020. Naturally, the prolonged periods of on-trade
closure and subsequent trading restrictions due to the
pandemic has impacted performance. Correspondingly,
and as previously stated, there will be no dividend
payable from CMBC in financial year 2021, although
we expect future dividends from CMBC to come through
following the reopening of pubs, the successful
integration and increased synergy benefits.
Marston’s has secure long-term financing in place.
Having satisfied the scheduled repayments for the
securitisation for quarters one, two and four,
demonstrating solid cash generation even under
significant trading restrictions, we drew upon the liquidity
facility to meet the April quarter-end principal and
interest payments. At the period close we had utilised
£25 million of the £120 million securitisation liquidity
facility, with £5 million repaid in October 2021.
In summary, we have significant cash headroom in our
bank facility to provide operational liquidity, and a
securitisation liquidity facility to protect bondholder
payments for at least 12 months should that be required
in the event of any further unexpected interruptions to
trading. Importantly, over 90% of our medium to
long-term financing is hedged thereby minimising any
exposure to interest rate increases that may arise over
the next few years.
Notes
1. See note 3 on page 100.
2. See Group Income Statement on page 85 and note 8 on page 104.
3. See note 30 on page 124.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Operating and Financial Review continued
Performance and financial review
Pub outlet
Administrative costs
Total pub
Share of associate
Total continuing
Brewing (discontinued)
Total
Revenue
Underlying
operating profit
2021
£m
401.7
–
401.7
–
401.7
22.1
423.8
2020
£m
515.5
–
515.5
–
515.5
305.5
821.0
2021
£m
34.8
(29.1)
5.7
(14.5)
(8.8)
1.4
(7.4)
2020
£m
84.7
(28.0)
56.7
–
56.7
17.3
74.0
As a result of the impact of COVID-19, we forecast
that additional covenant waivers/amendments will
be required. Whilst there is no certainty that such
amendments would 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.
Pubs
Revenue decreased by 22% to £401.7 million principally
reflecting the impact of COVID-19 and the significant
restrictions to pub trading during the period.
Within our pub business we operated 332 pubs under
the traditional tenanted and leased model generating
revenues of £24.7 million and underlying operating
profit of £11.5 million.
Pub outlet operating profit was £34.8 million
(2020: £84.7million). Reported underlying operating
margin of 8.7% is below last year reflecting the
lower turnover.
Share of associate (CMBC)
The operating loss from CMBC in the period of
£14.5 million reflects Marston’s PLC’s share of the
statutory loss after tax generated by CMBC in the
period. This improved in the second half of the year
due to reopening of the on-trade. This loss comprises
£4 million of underlying trading losses, £2.5 million
of restructuring costs, and £8 million in respect of
the adjustment to the contingent payment value
since completion.
Total tax contribution
£99.9m
Duty
£31.8m
Employee payroll taxes
£28.8m
VAT
£15.9m
Employer payroll taxes
£12.9m
Business rates
Other
Corporation tax
Total
£6.7m
£3.8m
£0.0m
£99.9m
Capital expenditure and disposals
Capital expenditure was £46.6 million in the year
(2020: £63.7 million). We expect that capital
expenditure will be around £55 million in 2022,
comprising maintenance of £41 million and investment
of £14 million.
Cash proceeds of £228.0 million were received in
respect of Marston‘s Beer Company and £16.2 million
have been realised in relation to the disposal of pubs
and our unlicensed property portfolio. The balancing
cash payment of £28.2 million from Carlsberg, for the
disposal of Marston‘s Beer Company, will be received
in December 2021.
Property
The Group’s properties went through an external
valuation with CBRE during the second half of the year
and the results have been reflected in the full year
accounts. The resulting carrying value of the estate is
£1.9 billion and as a result of the valuation and
leasehold impairment review there is an effective
freehold impairment of £102 million and a leasehold
impairment of £27 million. The average multiples used in
the valuation of 7.8 times were at the lower end of our
expectations and the multiples disclosed by both peers in
their valuations and recent comparable transactions.
Pensions
The deficit on our final salary scheme was £14.4 million
at 2 October 2021 which compares favourably to the
£37.2 million deficit at last year end. The decrease in
the deficit is due principally to a significant decrease
in the liability, driven by an increase in the discount rate.
We have concluded the 2020 triennial valuation and
agreed with the Trustees to maintain funding at the
existing levels of contribution.
Taxation
The total underlying loss before tax for continuing
and discontinued operations was £100.0 million
(2020: £22.0 million), upon which the total underlying
tax credit for continuing and discontinued operations
was £15.5 million (2020: £11.5 million). This gives a total
underlying rate of taxation of 15.5% (2020: 52.3%).
The tax rate is lower than the standard rate of
corporation tax primarily due to the post-tax share of
loss from associates included in the underlying loss
before tax.
Non-underlying items
There is a net non-underlying credit of £247.3 million
after tax, of which a charge of £42.1 million relates to
continuing operations and a credit of £289.4 million
relates to discontinued operations.
The charge in respect of continuing operations primarily
relates to the external estate valuation of the Group’s
effective freehold properties and the impairment review
of the Group’s leasehold properties undertaken in the
period, which resulted in a £83.9 million charge to the
income statement.
Other non-underlying items comprise £12.2 million of
costs/charges from COVID-19, primarily relating to
covenant waivers and contract penalties, central
reorganisation costs of £1.0 million, a pension scheme
past service cost of £0.5 million in respect of
Guaranteed Minimum Pension equalisation, a charge
of £0.6 million in respect of the net interest on the net
defined benefit pension asset/liability, an £8.4 million
net gain in respect of interest rate swap movements and
a £20.0 million gain in respect of the fair value of the
contingent consideration from the disposal of the
Group’s brewing operations. There is a credit of
£7.9 million relating to the tax on these non-underlying
items along with a deferred tax credit of £19.8 million in
relation to the change in corporation tax rate.
The credit in respect of discontinued operations primarily
comprises the profit on disposal of the Group’s brewing
operations, offset by business separation and
COVID-19 costs.
20
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Operating and Financial Review continued
Statutory measures
The following statutory measures are also relevant when considering the performance of the Group.
Free cash flow
Net cash inflow from operating activities
Interest received
Interest paid
Proceeds from sale of own shares
Free cash flow
Net cash flow
(Decrease)/increase in cash and cash equivalents in the period
Increase in other deposits
Disposals
Cash outflow from movement in debt
Net cash flow
Revenue
Operating loss
Loss before taxation
Profit/(loss) from discontinued operations
Net (decrease)/increase in cash and cash equivalents
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
Note
2021
£m
401.7
105.0
171.1
291.1
(8.5)
2020
£m
515.5
285.5
388.7
(11.1)
3.1
2021
Balance
£m
Depreciation
£m
Revaluation
£m
Adjusted
£m
–
36.1
1,984.2
15.9
12.9
52.3
5.1
–
(237.3)
1,869.2
12.3
299.9
(360.5)
312.2
(360.5)
–
48.4
1,923.6
15.9
12.9
52.3
5.1
–
(237.3)
1,820.9
49.8
2.7%
* Creditors comprise trade and other payables, other non-current liabilities and provisions for other liabilities and charges.
21
2021
£m
34.7
0.5
(96.3)
0.1
(61.0)
2021
£m
(8.5)
1.2
0.1
125.3
118.1
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Risk and Risk Management
Managing risk during a disrupted year
The risks related to the pandemic evolved during the
year: from the tiered system and local restrictions at the
start, on to a full lockdown, then a gradual reopening.
This has been followed by a succession of wider supply
chain issues. The hospitality industry has been impacted
more than most by the Government’s restrictions on
trade. The industry lobbied hard to get restrictions eased
where it was reasonable and safe to do so. However,
for all sites during the period between lockdowns, it
created a complex environment within which to operate.
The Government’s guidelines on trading at the start of the
year demanded a robust response in order to comply
with the expectations of local councils. When pubs
were able to reopen, many were impacted by the issues
with the NHS Test and Trace app, resulting in many
members of our pub teams having to self-isolate as a
result of being in proximity to someone with the virus.
With reduced teams we had to manage our pubs
carefully, shutting kitchens when necessary, and even
closing pubs on occasion, so that the safety and
experience of our guests was not jeopardised.
There remains the risk that the spread of the virus can
result in a number of our team members having to isolate
and, in some circumstances, may mean we have to
once again close kitchens or pubs because of the risk
to our guests’ experience and the safety of all.
By operating safely, we have demonstrated to
Government that its COVID-19 guidelines and
regulations can be effectively deployed at our premises.
There is no proof that shutting pubs or reducing trading
hours reduces the rate of transmission; in fact many
have argued that it leads to more social mixing within
the home, in conditions more conducive to infection.
Further lockdowns and restrictions on trade however
remain a risk and Government have indicated this could
extend into 2022.
22
In order to protect the liquidity of the Group the business
has cut costs, reduced capex and secured temporary
waivers from our bondholders to breach covenants.
This has allowed the business to manage its financial risks
and operate well within its financial cash headroom.
At the start of the financial year the business focused on
prudent cash management, which unfortunately resulted
in a number of redundancies in response to COVID-19
related restrictions and the reorganisation of the business
into a pure pub operator.
The agile nature of our Pub Support Centre to flex
working between the office, home and at pubs has
helped ensure the continuity of the business.
Financial processes, human resources and administrative
functions continued unimpeded by the lockdowns.
The resilience of our IT system has been further
strengthened during the year. Network bandwidth
was increased to cope with additional homeworking,
upgrades to applications were applied remotely without
the need to be in the office, and our investment in cyber
defence was increased to better identify and contain
any threats.
The continuous operation of our supply chain remains
a risk at present, while the economy adjusts and global
demand for commodities, technology and energy
intensifies. Our food supplies, in particular those from
overseas, require unimpeded routes of transport in order
to remain fresh. The delivery of goods to our pubs
remains strong despite these challenges. The risk has
been mitigated by offering a reduced menu and by
substituting food items where sourcing has become a
problem. Working closely with our suppliers has been
critical in order to identify issues early and change
our orders where necessary.
The business is currently in a transitionary period with
CMBC as business processes, systems and IT networks
are moved into the control of the partnership. During this
period we have run many of the core processes for
CMBC, such as the sales order process and payroll,
so that their transition can be effectively managed in
order to minimise any risk of disruption or loss of data.
The transition will conclude next year. The separation of
the businesses continues on-track, requiring a dedicated
response from our IT team and the team at CMBC to
engineer these changes. Both businesses are working
hard to successfully complete the transition of
these arrangements.
Risk management at Marston’s
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 assessment 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 relationship with our guests is implicit to our trade.
Our guest surveys provide essential information about
our levels of service. We intend to manage the risk to
reputation by collecting social media scores on all of
our managed and franchised sites. This will better direct
the focus on those sites where improvements in reputation
matter the most.
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
level of 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
those risks completely that pose a threat to achieving
our strategic objectives.
If avoidance is impossible, Marston’s will seek to mitigate
risk by investing in effective controls or by 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 and the public, by guarding against threats to
health, hygiene and safety as an absolute priority.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Risk and Risk Management continued
Current key risk drivers
A. Pandemic
The risk of further waves of infection, or new variants of
the virus, still dominates the spectrum of risk for the
business. The rollout of the vaccine during the reporting
year has allowed the hospitality industry to reopen its
sites without trading restrictions. There remains the risk that
restrictions, or even lockdowns, could be re-imposed if
the Government considers again that the NHS is under
threat and that closing venues will result in fewer
opportunities for transmission.
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 should the
Group not be able to secure additional waivers.
During the year, Marston’s used proceeds from the
creation of CMBC to paydown debt, and its target
to reduce debt further helps to mitigate this risk.
The pandemic had a short-term impact upon the
business; following the reopening, the demand for
pubs and room accommodation has surged,
demonstrating our long-term viability.
C. Health and safety
The pandemic increased the threat to public safety
everywhere. We recognise that the safety of guests
and our people is critical to the continuing operation of
our sites. Marston’s has proved its ability to operate
within the Government’s guidance and regulations.
Our development of a new food information system this
year has enhanced the flow of information regarding
food ingredients from our suppliers to our pub teams.
D. Supply chain
During the year the business has experienced disruption
to its supplies of CO2 which is used in the dispense of
drinks at the bar, and also used by our food suppliers
within production and packaging. The risk was largely
mitigated through planning and monitoring supplies, and
the Government has now provided direct support to the
CO2 producers to restore capacity. Also, the shortage
of HGV drivers, and certain food and drink products,
impacted the delivery of supplies to our sites; this has
been mitigated by working with our suppliers to identify
problems early so that substitute items can be arranged
that do not diminish the enjoyment of our guests.
The Government has delayed the full border checking of
goods coming from the EU until January 2022; this is a
welcome announcement, particularly while supplies
remain stretched. The Government’s preparations for
these checks have not been tested and at present it is
unknown whether or not the checks will result in delays.
E. Recruitment and retention
It is likely to be more challenging in the near future to
recruit. Post pandemic there are more vacancies within
the hospitality sector. In order to mitigate this, the business
has reviewed its competitiveness at recruiting the
best people.
We actively manage the engagement of our people,
surveying and reporting back to our teams the steps
taken to address their concerns, and listening to their
suggestions. We act to keep pay and rewards
competitive, and respond quickly when issues regarding
retention are identified.
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 by controls.
1. Pandemic
2. Liquidity
3. Health and safety
4. Food safety
5. Financial covenants, pension fund deficit, and accounting controls
6. Market and operational
7. Political and economic risk
Information technology
8.
1
6
2
8
5
7
3
4
t
c
a
p
m
I
Key
Increasing risk
No change in risk
Likelihood
23
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Principal Risks and Uncertainties
The Board recognise the
following principal risks as
those that could impact upon
the operation of the business
and the achievement of its
strategic objectives.
The Group’s risks change over time and consequently this
is not intended to be a complete assessment of all risks.
Pandemic risk remains as an individual key risk due to
the continued uncertainty of any future restrictions and
their impact upon operations. It remains as one of the
few risks which can result in the complete shutdown
of our pub estate.
Key
Increasing risk
No change in risk
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.
• Adaption of our pubs to facilitate social distancing.
• Training our team members.
• Building contingency plans for future lockdowns.
• Consulting with our employees on safety concerns and
operational issues.
• Simplified menus, streamlined guest offering to concentrate upon
offering the highest guest satisfaction at the right margin.
• Regular scrutiny of asset values.
Movement – No change in risk: COVID-19 remains a risk to our business. The world is still in the midst of the pandemic. Future variants of the virus are possible while
vaccination rates remain low in many countries. Future Government restrictions on trading could be announced in response to the NHS once again coming under pressure.
Opportunity: Our pubs were sorely missed during the lockdowns, demonstrating their importance to communities. Pubs can benefit from the increased spend by the public
within the locality of their homes due to changing work location patterns, and more holidays taken in the UK. The changing marketplace creates opportunities to standout to
our guests.
2. Liquidity
Risk context
Financial strategy is to
reduce debt.
The risk
While the UK recovers from the
pandemic there is still 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 Government.
Mitigation
• Significant headroom in our bank facility to provide operational
liquidity. See page 31 for our Viability Statement.
• Reduce debt.
• Conserve liquid funds by reducing costs.
• Maintain strong relationships with financial backers.
• Continual demonstration that pubs can operate in a
COVID-19-safe manner.
• 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 – No change in risk: Uncertainty remains regarding the UK recovery from the pandemic, infection rates and future Government policies.
Opportunity: In the medium-term, competition may reduce as a result of operators having scaled back their activity, or left the market, bringing opportunities at the right rate
of return.
24
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Principal Risks and Uncertainties continued
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.
The risk
Breaches of health and safety regulations
attract media attention and high penalties.
Further COVID-19 trading restrictions.
Potential impact
Financial penalties.
Significant damage to reputation.
Mitigation
• Health, safety and hygiene management systems embedded.
• Operating instructions amended to reflect Government instructions. Pub teams trained
on the new instructions. Pubs audited on their implementation.
• Dedicated safety advisers seeking continuous improvement.
• Regular independent expert safety audits at our pubs.
• Training of team members.
• Escalation of potential safety threats to senior operational management.
Movement – No change in risk: 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 for us to be differentiated by our absolute commitment to guest care and building long-term trust.
4. Food safety
Risk context
The provision of accurate and reliable
information on food to our guests is paramount.
Our guests trust in our high standards of food
hygiene, but this can be quickly eroded by
individual incidents.
Potential impact
Financial penalties.
Significant damage to reputation.
The risk
Breaches of food standards regulations attract
adverse media attention and high penalties.
Public concern over allergens continues
to grow.
There is a risk that information is collected
incorrectly from our suppliers and/or
misinterpreted for our menu items. There is also
a risk if a team member mis-advises a guest
on ingredients, or serves the wrong meal.
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
• Maintain excellent levels of compliance through policies, training and monitoring.
• 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.
• Food information system facilitating the collection of detailed information on food
constituents, providing a clear audit trail and removing, where possible, the chance
of manual error.
• Smaller menus than previously, allowing a greater focus upon quality.
Movement – No change in risk: The risk remains significant because of the wide variety of food items we source, and levels of food intolerance amongst the public.
Opportunity: There is an opportunity to enhance Marston’s reputation for food safety and the care of our guests. Our implementation this year of a new food information system will allow us to collect and provide more detail to our
guests and enhance safety further.
25
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Principal Risks and Uncertainties continued
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 risk
Breach of the covenants with our lenders.
Incorrect reporting of financial results.
Unauthorised transactions.
Potential impact
Loss of investor confidence and reputational
damage. Breach of covenants, resulting in
additional financial operating restrictions.
The pension deficit will increase while
investment yields fall.
Further lockdowns or other COVID-19 safety
restrictions could impact upon the normal
operation of our pubs and lodges.
Covenants could be impacted by a fall
in profit.
Mitigation
• Covenant waiver permission sought from bondholders/financial lenders.
• 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.
Movement – No change in risk: There are strong controls mitigating this risk to a low level. Uncertainty regarding further Government imposed COVID-19 safety restrictions in the future remains. The impact on our covenants is
reduced by clear communications to, and engagement with, our lenders which explains the effect of the current trading conditions.
Opportunity: To further strengthen our relationships with our bondholders, communicating information on the business and its recovery from the pandemic.
26
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Principal Risks and Uncertainties continued
6. Market and 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.
Uninterrupted operations are dependent on the
continual supply of goods and services often
from single sources.
The operational performance of our partnership
with Carlsberg is materially significant to our
total profit.
The risk
Failure to attract or retain the best people
negatively impacting pub performance.
Recruitment could be more of a challenge
due to the high number of vacancies currently
within the sector.
Disruption to key suppliers, particularly those
closely involved with our day-to-day activities
(logistics, food, drink), or shortage of
commodities could significantly impact
Marston’s operations.
Disruption to food supplies from the EU due to
administration, or customs checks, impacting
upon our offering to guests and our cost base.
That our pubs, brands or services fail to attract
guests, do not reflect changing preferences,
or offer poor service or quality. Equally there
is a risk that our prices become uncompetitive.
Inflationary pressure on costs might be difficult
to pass on, resulting in reduced margin.
Potential impact
Reduction in the number of sales or lost
opportunities to increase our
value proposition.
Reduction in guest satisfaction levels, and
repeat visits to our pubs.
Increased costs as a result of seeking
alternative suppliers.
Mitigation
• Continual awareness of our people offer compared to our competitors through
participation in appropriate networks.
• Improved training, induction and development programmes.
• Surveying the engagement of our employees and identifying action points for teams.
• Continual assessment of guest 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, in sufficient detail, of guests’ sensitivities.
• Marketing, including digital marketing campaigns.
• Cost control, 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.
Movement – Increasing: Competition to recruit the best people is likely to increase during the 2021/22 financial year. Short-term supply chain problems are increasingly likely to create some disruption, which the Group will seek
to alleviate. The operation of our pubs could be impacted upon by further, or extended, trading restrictions as a result of the pandemic.
Opportunity: Post pandemic, pubs have an opportunity to build on the renewed interest in pubs.
27
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Principal Risks and Uncertainties continued
7. Political and economic risk
Risk context
The Government could bring in additional
restrictions for pubs and lodges to
operate within.
Supply chain issues could continue to create
operational problems for our suppliers.
Inflationary pressure could increase the cost
of the Group’s inputs, whilst undermining
consumer confidence.
The risk
Supply chain disruption could reduce the
ability of the UK to recover and grow the
economy. It could also fuel further inflation
resulting in less disposable income
for consumers.
The import of goods from the EU could be
disrupted by the Government’s plan to start
customs checks in early 2022. Fresh food is
reliant upon fast delivery. In the event of
disruption, it could be difficult to source
alternative supplies of food and drink for the
same cost.
Potential impact
Costs of food, commodities and equipment
could rise as a result of a lack of supply.
Mitigation
• Positioning our guest offer at the right price point.
• Continue to lobby Government on the COVID-19 safety measures operated within
It may be harder to secure long-term
agreements with our suppliers.
Customs duty border checks could disrupt
our supply chain impacting upon the
availability of food and drink brands to
our pubs.
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.
Movement – Increasing: We recognise the disruptive effect that cross-border controls could have upon our imports, and those of our suppliers. Increasing inflation would impact the cost base for many of our suppliers and pub
operations, and also for our tenants.
Opportunity: The Government’s delay in custom checking all goods from the EU until the start of 2022 is welcome, and will hopefully result in greater efficiency during the customs declaration process. Pubs normally remain very
competitive when prices are rising in the economy, offering an experience which is value for money.
28
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Principal Risks and Uncertainties continued
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 continuous operation of our business is
dependent upon the uninterrupted running
of our computer network, site links and
the internet.
An increased cyber threat as criminals try
to take advantage of the increase in
homeworking compared with two years ago.
Marston’s handles the personal contact details
of many of its guests who opt to use the Wi-Fi
or receive mails, as well as a large number
of employees.
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.
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 employee awareness regarding IT security.
• Data security policies, processes and training.
• Data breach incident response plan and scenario training.
• Work at home policy.
• Additional network bandwidth and additional VPN access.
Movement – No change in risk: Global cyber risk has evolved in recent years, targeting the theft of personal data, launching ransomware attacks and intercepting transfers of money. Marston’s has invested in its network
protection, firewall and device monitoring functionality. Penetration testing is conducted 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, as required, creates greater agility and resilience for the business. Our engagement with guests through technology in a cyber secure manner creates more
digital marketing opportunities.
29
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Levels of Defence
1. Management ownership
Our managers are responsible for identifying risks,
monitoring them and operating the control environment
necessary to mitigate them to a level which is within
the risk appetite of the business.
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.
Management are responsible for monitoring and
reporting upon the effectiveness of the business’s key
controls to the Board via the Corporate Risk Director.
A record of these controls is kept in our Corporate Risk
Register. The managers’ assessment of the effectiveness
of the key controls is collected by our Internal Audit team
and tested during the year. The assessment of the controls
by management is reported to the Board.
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.
30
• 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.
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.
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, where 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.
ESG Committee
(Chaired by the Corporate Risk Director) This year we
have redefined our corporate responsibility approach in
terms of Environmental Social and Governance (ESG).
By doing so we have aligned our corporate
responsibility with the key interests of our stakeholders
categorised as either environmental, social or
governance. The Committee defines the ESG priorities
of the business, identifies the relevant actions taken by
management and considers progress of those actions
against targets. See our Resources and Relationships on
pages 32 to 43 for more information on our key areas
of responsibility including people, guests, community,
partners, suppliers, 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 our
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.
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 attends the
Audit Committee meetings and can raise any concerns
regarding risks independently.
Enterprise Risk Management (ERM)
The Corporate Risk Director, who heads the 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.
Levels of insurance cover are managed by the
Corporate Risk Director with the authority of the Board
and in consultation with external advisors. New levels of
insurance and cover are considered each year in the
context of the changing risks and external threats.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Levels of Defence continued
Internal Audit
The Internal Audit function is managed by the Corporate
Risk Director, and is independent from the operations of
the business. 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 Corporate Risk
Director. The plan takes into consideration the key risks
within the business, recorded in the Corporate Risk
Register, areas of increased risk and the regularity of the
testing. The plan is developed in consultation with the PLC
Exec and the Risk & Compliance Committee and takes
into account areas of concern which require additional
assurance from audit testing. Where necessary
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 some of 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 of all the tenanted sites to their
drinks contracts.
4. Strategic
The PLC Exec is chaired by the Chief Executive Officer
and comprises, amongst others, the two 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.
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 the impact of
emerging legislation.
New Non-executive members of the Board are
inducted into the business through meetings with senior
managers, the PLC Exec, the finance team and external
advisers. This gives new members the opportunity to
understand the challenges for the business, risks and the
controls and processes operated. New members are
also given a pack of information on business operations
and access to previous Board and Committee minutes
as appropriate.
31
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. Consistent with the
previous year, three years continues to be adopted as
an appropriate period of assessment as it aligns with
the Group’s planning horizon in a fast moving market
subject to changing consumer tastes in addition to
economic and political uncertainties, and is supported
by forecasts as approved by the Board. It also aligns
with the Group’s capital investment plans and gives a
greater degree of certainty over the forecasting
assumptions used.
The Directors’ assessment has been made with
reference to the Group’s current position, its financial
plan and financial planning process, comprising a
detailed forecast for the next financial year, together
with a projection for the following two financial years.
The plan also reflects the Group‘s principal risks and
uncertainties set out on pages 24 to 29, specifically
pandemic (risk 1), liquidity (risk 2), market and
operational (risk 6) and political and economic
(risk 7) risks.
To assess the impact of the Group’s principal risks and
uncertainties on its long-term viability, a severe but
plausible downside scenario was applied to the
Group’s financial forecasts in the form of reduced
sales, the closure of pubs from restrictions imposed,
increasing costs and increased borrowing costs.
It is assumed that the Group’s financial plans would be
adjusted in response to each scenario by reviewing
controllable cost and discretionary costs alongside
capital investment.
opening restrictions at a national level for a two-month
period in January and February 2022 in line with the
previous year’s Winter lockdown. Whilst the experience
of the pandemic could be expected to lead to lasting
changes in both guest behaviour and competition
in the hospitality sector, in making this assessment the
Group has taken the view that the material adverse
impact of the pandemic on sales, through trading
restrictions, will be temporary in nature and should not
extend to any material extent beyond 2022.
Liquidity (risk 2), both secured debt and unsecured
facilities, are assessed in the forecasts and in both
the base case forecast and the severe, but plausible
downside case the Group will 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 over going concern in the financial
statements), given our experiences to date we are
confident of securing these where necessary. In all
scenarios the Group continues to remain profitable
with sufficient liquidity.
In the forecasted period the Group is required to
refinance its unsecured facility in March 2024 and it
has been assumed that this would be on the same
commercial basis.
The resilience of the forecast considers, market and
operational (risk 6) and political and economic (risk 7)
risks, focused on the impact on sales of the slower
return of guests to pubs alongside increasing costs
from inflationary pressures and regulatory changes.
The forecasts considered market insight and trends
based on changing consumer behaviour and therefore
considered the allocation of capital to adapt to
these trends.
The principal risk currently facing the business relates to
the continued uncertainty surrounding the COVID-19
pandemic (risk 1) and subsequent variants and the
consequential impact on trading should any future
restrictions be imposed, thereby inhibiting activity and
sales income. The Group has reviewed this possibility in
the forecast scenarios and sensitivities by incorporating
a further lockdown (downside scenario) and pub
In making this statement, the Directors carried out a
robust assessment of the principal risks and uncertainties
facing the Group, including those that would threaten
its business model, future performance, solvency or
liquidity. Principal risks and uncertainties set out on
pages 24 to 29 are the result of internal risk
management and control processes, with further details
set out in the Audit Committee’s report on page 57.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our Resources and Relationships
Our business is dependent upon
resources and relationships,
and our long-term success
will be sustained by carefully
managing both.
This year we have considered both through the
perspective of Environmental, Social and Governance
(ESG), recognising that the ESG framework is how many
investors and analysts collect comparable data.
Marston’s has for many years invested in corporate
responsibility, recognising the important social purpose
of pubs to communities, as well as operating ahead of
our sector on environmental improvements such as zero
waste to landfll and installation of electric car chargers.
Our social responsibility
As the country emerges from the pandemic we have
re-evaluated what pubs mean to their communities.
During the lockdown, pubs were sorely missed as social
hubs and familiar places for people to see each other.
Before reopening we worked hard to refurbish, develop
outside areas, redesign gardens, decorate and clean
our pubs, determined to come back stronger. Pubs are
unique spaces which refect the character of their area
and are welcoming and inclusive for all.
During the lockdown periods and ahead of reopening
our business, we also invested in our people through
training and learning opportunities, as well as providing
resources on helping our people manage their fnancial,
physical and mental health. We recognise that it is
important to invest in and support our people, who in
turn look after our guests and the communities we serve.
In order to refect this, we are seeking to identify a
champion ESG Social target which will express the
importance of our commitment to local pubs and
their communities.
Our environmental responsibility
Our plan for achieving Net Zero emissions will be a key
focus during the year ahead. We are targeting to reach
Net Zero carbon neutral on Scope 1 and 2 emissions
by 2030, and on Scope 3 emissions by 2040.
We have worked with the Zero Carbon Forum to adopt
a plan which is practical and cost effective. Over the
past year we have launched projects to move us
signifcantly further along the road to achieving
Net Zero, including sourcing renewable electricity,
building control optimisation and employee training.
A key area identifed this year for future improvement is
food waste, which is an issue for our business and for the
nation. It is both a waste of resources and contributes to
gas emissions which are harmful to the environment.
We are in a position where all the food waste,
separated and collected, can be measured. This data is
provided by our waste collector by site, and now
presents an opportunity to monitor and benchmark
volumes over time. We intend to investigate the causes
of waste to identify opportunities for reduction.
Working with our pub teams, we will identify operating
practices which can be confgured better to reduce
waste, and with our suppliers on the formulation of food
and the associated issue of packaging waste.
We are confdent that volumes can be reduced,
particularly through campaigns and awareness raising.
In the year ahead, as we develop our understanding of
how food waste occurs within our pubs and our supply
chain, we intend to set targets internally, the progress
against which we shall report in the future.
We have identifed a range of other ESG targets
including environmental targets concerning emissions
and recycling. Our progress on these ESG targets will
be monitored by our ESG Committee, which reports
progress to the PLC Exec Committee and to the Board.
For more information on our approach to ESG, please
see www.marstonspubs.co.uk/responsibility.
32
Our approach to ESG
Pubs to be proud of
Working together to create a sustainable future for
our business, for the beneft of all our stakeholders
Our people
Guests
Communities
Partners
Suppliers
Environment
Page 33
Page 36
Page 37
Page 38
Page 39
Page 41
We are Guest Obsessed
We Raise the Bar
We will Grow
Calorie labelling
Food Supplier Charter
Net Zero roadmap
Sugar, salt and calorie reduction
Innovative partnerships
Apprenticeships
Development of outside areas
Pulse surveys
Food waste reduction
Community engagement
Allergens training
Energy effcient technologies
Digital learning and development
Strong fnancial partnerships
Renewable electricity
Supported by investors and Government
Page 43
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships
We invest in our people
The achievement of our
strategic objectives is
dependent upon the quality
of our people. We recognise
the responsibility we have
supporting and developing our
teams. Our communications
are key; both our ability to
share information but also to
listen to our people in order to
continually drive engagement.
Our people purpose aligns to our competitive strategy
– delivering great guest experiences. The engagement
and enablement of our teams remains front and centre of
our plans. The activity underpinning the people strategy
continues to be focused on supporting our pubs and our
teams to deliver great experiences to our guests, using
the pressure test question of “Does this better enable our
teams to deliver a great guest experience?”. This ensures
we remain focused on the people priorities that support
and deliver our business plan.
This year we have worked on embedding the principles
of a great business, starting with the newly formed
Leadership Group and taking this into the organisation
through our new behavioural framework.
Once again our employees have shown their resilience
and commitment, many of whom were furloughed during
the lockdowns. On reopening the pubs, the level of pride
our people have in their work was an inspiration; from
deep cleaning their premises to rapidly adopting new
working practices to ensure safety and being ready to
welcome guests back. When our people came back to
work, they were enthusiastic to offer a warm and safe
welcome to returning guests and do all they could to
bring back the pub experience that our guests love.
Caring for our people is at the heart of our philosophy.
During the lockdown we worked tirelessly to ensure that
our people remained as one team. Our communications
were increased to ensure that everyone received clear
messaging on the information they needed to know and
act upon, whilst still focusing on morale and wellbeing.
Our one team approach is at the heart of how we
operate. This year we have expanded our channels of
communication with the introduction of Yammer, to
quickly share news across the business. This allows our
people to create and join individual communities
focused upon topics of interest. Ideas can be quickly
disseminated and collective viewpoints gathered.
This allows everyone in the business to be connected in
a way that was not possible before.
We have always believed that the long term
development of our people, their confdence, skills and
experience, is a responsibility of the business.
We recognise that their personal development is a
critical requirement for sustained commercial success.
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.
Following the conclusion of the disposal of Marston’s
Beer Company into CMBC, we have been able to
reorganise our teams so that they are in the most
appropriate shape to deliver on our promise to operate
‘Pubs to be proud of’. This pub-centric approach has
been adopted by all our team members, re-evaluating
their own contribution to supporting the operation
of pubs.
Areas of focus this year
This year we have invested in a new Digital Learning and
Development Team, and over £0.5m into new systems
and technology, including Marston’s Campus and
Marston’s Skills.
Digital Learning – Marston’s Campus
During the pandemic, it became apparent we needed
to not only support our employees’ wellbeing but also
give ourselves a solution to deliver training, workshops
and career pathways remotely, to enable us to continue
building towards a better future. Whilst we had a
learning management system, previously known as
Talent Academy Online, its functionality did not ft the
needs of our newly aligned pub company.
Continuing to partner with CPL Learning and seeing
the beneft in having a system that allows for remote
delivery, we made the decision to not only upgrade
the learning management system for the pubs and our
Pub Support Centre, but to make it available to licensees
in over 950 of our retail, franchise and tenanted pubs.
This investment is one of its kind and allowed us to take
the lead in the market for learning and development
solutions within hospitality.
33
Marston’s Campus allows all our employees and
partners to beneft from mandatory training, digital
training record cards, over 40 e-learning courses,
learning on demand tools, self-directed learning tools,
podcast channels, a digital course booking system and
the ability to digitally record coffee chats/informal 121’s.
This year we have had more than107,000 course
completions by nearly 12,000 users.
Marston’s Skills
After a successful trial in July 2021, we signed a three
year contract with worldwide gamifcation company,
Attensi. Gamifcation is a reward-based learning
solution, whereby learnings embed based on the
challenge and competition to be ‘top of the leader
board’. The repetition of the learning allows for key
messages to become more cultural and behavioural led.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Marston’s ‘Your Voice’
Through our strategic partnership with Peakon, we have
this year implemented our engagement survey tool,
‘Your Voice’. All our team members are invited to
complete a survey of questions aimed at measuring
their engagement. The results are reported regularly
and confdentially to their line managers. The system
also allows our employees to provide comments,
again confdentially, which in turn can generate actions
for teams to discuss, agree and track progress.
Line managers are provided with a dashboard to help
manage this process and seek improvements in
engagement scores over time. Decentralising our
approach will empower our leaders to be more
responsive and agile when it comes to
driving engagement.
We have recently enhanced this culture of continuous
listening through monthly pulse surveys that will give our
leaders real time, actionable insight on the engagement
and performance of their teams.
Our aim, by collecting employee feedback, is to build
an accurate picture of employee experience so that we
can address the needs of our people and cultivate a
high-performance culture. With the current pace of
change, our previous annual ‘moment in time’ surveys
did not enable us to do this.
Apprenticeships
Due to the closure of our pubs this year the number of
apprentices reduced to just over 140. We are proud to
say that our target for training apprentices will return to
500 next year. Our apprentices were able to take a
break in learning during their period of furlough,
particularly where line managers and mentors were not
available for support. Following the lockdown, 89% 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.
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. This year we held
our frst graduation ceremony for 60 of our apprentices
who have achieved level 3 or level 4 certifcates.
Marston’s has also successfully gained funding for 209
new starters under the Government’s Kickstarter Scheme.
The scheme helps to create job placements for young
people aged 16 to 24 years, for a period of 6 months.
We consider this an excellent opportunity for young
people to experience working for a pub company.
To date 60 have enrolled. We expect that 70% of those
completing the scheme will stay on within the business.
We aim to continue our work experience programme
‘Take 5’ next year, which had to be halted this year
during lockdown. The programme was developed a few
years ago to engage with the next generation of school
students and with parents, educators and careers
advisers, promoting ‘Loving Hospitality’, a collaboration
with our industry peers.
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’. Our people strategy is aligned with operating
a great pub business and has three core
strategic pillars.
1. We are Guest Obsessed
We must deliver great guest experiences to all who
visit our pubs. The key to this success is the people who
work in them; 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 pub support teams alike.
Closely aligned to our culture and the wellbeing of
our people, our reward plan focuses on ensuring that
we deliver the basics but also inspire and motivate our
people to be the best they can be. Our people are
empowered to take the initiative and be engaged in
the roles they perform.
We strive to recruit the very best guest obsessed
people. Our recruitment campaigns are 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.
This year we have run a leadership programme from
Executive level down to frst line management that
embodies the values and behaviours necessary to
move the Group from ‘Good to Great’. Our managers
have engaged enthusiastically with this programme,
allowing us to identify the key attributes that our
business has to have to become a great business.
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 refect the caring culture and
values that defne our business. Underpinning all of
this is the support we will continue to provide through
our weekly communications to all our people sharing
hints, tips and content focused on our teammates’
physical, mental and fnancial 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. 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 refect the society and communities in
which we work and serve.
34
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Digital revolution
As part of the pandemic, communicating with and
supporting the training of our people remained our
top priority.
We also launched a refresh of our digital learning
platform Marston’s Campus, a sleeker, more
accessible, mobile-friendly learning platform.
In May, we launched Yammer to our Pub Support
Centre and to our General Managers in our
managed pubs. This is where our people get the
latest news and updates from across our business.
Here teams can feel part of the Marston’s
community: one team, share ideas, get involved
and have their say.
As previously shared, Marston’s has signed a three
year contract with Attensi to continue providing a
gamifed training platform to team members.
We launched Marston’s Skills back in April this year
– a mobile frst training platform that challenges
players to complete a series of mini games, all of
which are based on real-life pub scenarios.
Team members have confrmed they prefer this
method of training as it is much more accessible and
engaging, unlike other traditional methods.
The system hosts:
• Webinars – over 40 e-learning courses, including
areas of mandatory training.
• Training record cards for pub teams.
• Self-directed learning opportunities through our
‘Discover’ section.
• Bespoke training, guides and courses for specifc
areas of our partners’ business such as operational,
systems, events, recruitment, inclusion, leadership
and development support tools.
• Event and training course booking systems.
• Apprenticeship enrolment assistance.
• Certifcates
upon completion of courses for team members.
• News feature, sharing learning and development
news with our partners.
35
Progress against key targets
1. Employee engagement
Survey responses are collected on a regular basis from
all employees using ‘Your Voice’ and the results are
reported back to team leaders. The overall engagement
score is broken down into the drivers of the result, the
priorities and strengths. Suggested actions for
strengthening the score are available within a manager’s
dashboard that operates on a real-time basis along with
learning and support resources. Due to the pandemic
we did not conduct an engagement survey in 2020,
and in 2019 the survey was collected using a different
platform and methodology. This year the engagement
score for the Group was 7.9 (8.1 during the lockdown)
which compares favourably with the industry benchmark.
Individual comments and suggestions are collected
confdentially from the team, displayed within a
dashboard that can be shared and provides the basis
of discussion with the team and future actions.
The system has been received well and is already
impacting upon improved engagement. We are
targeting an improvement in the engagement score for
next year, and further embedding the system by moving
to monthly pulse surveys.
2. Great place to work
A strong employer brand will enable us to compete for
the best talent and give us more credibility as a business.
Our Glassdoor rating is an external refection of how
our employees, both past and present, feel about
their experience of working for Marston’s. Our current
rating is 3.6 and our target is to achieve a rating of 4,
which would make us the highest rated hospitality
employer and give us a competitive advantage in the
talent market.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Welcoming our guests
Offering great quality
experiences for our guests is
our top priority.
We constantly strive to ensure that our guests’
experience is a true pub experience, especially when
they have missed so much while the pubs were closed.
We worked especially hard prior to reopening to ensure
that our pubs and lodges were ready to welcome back
our guests and offer them a safe and enjoyable
environment in which to drink, eat or stay. We have
listened to the feedback from our pub teams and guests
to help inform our responses to guest preferences,
suggestions or concerns.
Providing good food and drink is at the heart of our
business. Keeping that offering special and innovative
is what our guests love.
Adapting our food offering and our brands to meet our
changing guests’ tastes and introducing them to new
menu items and drinks is exciting for our business.
The recovery from the pandemic has meant that we have
reduced the size of our menus to allow kitchen teams,
with limited capacity, to deliver guests their most loved
dishes to the highest of standards. Our guests have
appreciated the shorter menus and have praised the
level of quality that we have achieved. We continue to
invest in systems and work practices that provide
accurate information on allergens and nutritional content.
From our suppliers through to our kitchens, and to the
information provided to our guests, we have worked to
enhance the fow of this data to increase its reliability.
Safety assured upon reopening
We kept our guests informed during lockdown and, on
reopening, we communicated the measures we had
taken to keep them safe in accordance with the
Government’s safety guidance, and our ‘Makes Sense’
initiative. Our aim has been to ensure guests feel
comfortable, relaxed and welcome whilst reassured
about safety. Our teams’ training encompasses the new
safety measures to create the best experience from the
outset and ensure our guests are happy to return.
Areas of focus this year
• Calorie labelling on menus will be compulsory from
April 2022. Marston’s has been involved with the
Government’s consultation, offering feedback on the
draft guidelines and has set up a cross functional
group to plan for this.
• Collaborative work with our suppliers has continued
to reduce the sugar and calorie content in our menus
ahead of calorie labelling. This is being achieved
through dish and product redevelopment and exciting
new products.
• Natasha’s Law became compulsory in October 2021
and has introduced mandatory labelling of wrapped
food prepared on site. We have reviewed the food
offered by our different pub formats and by our
partners in our pub estate. Where the law has an
impact, we have provided training or changed
products to comply.
• We are meeting the existing salt reduction targets set
by the Offce for Health Improvement and Disparities
(OHID) when creating new menu items. We are
working towards the 2024 targets on all our items
and, based on our previous work in this area, we are
in a good position to achieve these targets.
• We are continuing to commit to redeveloping all own
brand products, where egg is used as an ingredient,
to be cage free by the end of 2025. All shell eggs
have been cage free since early 2019.
• We have maintained our great 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.
• We continue to meet the growing demand for hot
drinks, keeping our coffee machines at a level of
quality that meets the tastes of our guests. We partner
with suppliers who source their own Rain Forest
Alliance accredited coffee bean.
Our guest strategy:
• 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.
Progress against key targets
1. Food information system
Our new food information system has gone live this year
with our suppliers able to enter data about their
ingredients. This major project will improve the collection
of information from our suppliers on nutrition, allergens,
safety and ESG factors and this is expected to complete
in 2021/22. The 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.
The data collected will support the accuracy of calorie
information on the menu for food and low or no alcohol
drinks and soft drinks, mandatory from April 2022.
The system documents the OHID’s 2024 salt targets, as
well as our targets for reducing sugar and calories.
All new products will have to meet these targets, unless
deemed an essential branded product where we have
less infuence with the supplier.
• We Raise the Bar – we constantly seek to improve
guest satisfaction through reducing operational
complexity, more targeted and timely
communications, further enhancing the capabilities
of our support specialists and building on our
relationships with our suppliers. Our ‘Pride in Plate’
programme seeks to deliver the highest quality food
from feld to fork.
• We will Grow – aimed at our margins, guest loyalty,
new visits and return on investment. We continue to
work on integrated category plans, ways of
rewarding guest loyalty, additional revenue
opportunities and more disciplined pub
investment decisions.
Phase two of the project will be to enhance the
information for guests by giving them access in-pub
to the live data via screens or tablets.
2. Allergens
Allergens training has been extended to all members of
our pub teams, food development team, marketing,
customer services and operations teams. The training has
reinforced how highly we value the importance of
equipping our teams with the right knowledge regarding
allergens. We have also launched an allergy auditing
programme, which will include visits by mystery guests to
managed pubs.
We continue to work with our suppliers to record key
drink ingredients to provide clarity to our pub teams and
guests. Our intention is to engage with these suppliers in
future through our new food information system, in order
to expand the detail collected on drinks ingredients.
36
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
We are at the heart of our local communities
Investing in our pubs serving their communities
Investment in our pubs prior to reopening, particularly in our outside areas to accommodate guests in
gardens, under shelters and marquees, and support efforts to socially distance involved a range of exciting
new projects. These enhanced the outside spaces of our pubs in readiness for when they could reopen and
below are some examples of the brilliant work our team members have done.
Our pubs are highly valued
by, and an integral part of,
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 fund raising.
Areas of focus this year
• The prime focus this year has been to operate our
pubs safely, recognising the important role they play
in social life. We kept our communities up to date
with our reopening plans aware of how eagerly this
was anticipated.
• Investment in our pubs prior to reopening, particularly
in our outside areas, to accommodate guests in
gardens, under shelters and marquees, in support of
efforts to socially distance. We worked on a range
of exciting new projects to enhance the outside
spaces of our pubs in readiness for when they could
reopen. From marquees and awnings to jumbrellas
and teepees, we have been busy investing in and
creating ‘inside-out’ areas for our guests to enjoy
and come together to share a great experience,
even during inclement weather. Working closely with
our contractors and suppliers, we have completed no
less than 320 projects across our estate so far.
Progress against key targets
1. Encourage our pubs to engage with their
local communities
In recent years we have involved our pubs in our
Community Heroes Week campaign aimed at raising
funds for charities of their choice. The activities were
supported by our Pub Support Centre. Unfortunately,
the pandemic halted this campaign while pubs were
shut. We are currently reviewing how the charitable and
community activities of our pubs can once again be
supported next year.
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 Group’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-fag-scheme
37
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Support for our partners and 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.
Marston’s recognises that our partners’ commitment
to their businesses is what determines its success.
Trading conditions have been very diffcult for our partners
this year due to lockdowns, opening restrictions, recruitment
challenges and safety precautions. We have supported
our partners with a discounted rent during the lockdowns
along with advice on grants and other fnancial support,
together with operational guidance whilst trading.
Now there is a renewed optimism, which we share, that
these businesses are well positioned to take advantage
of the increasing popularity of community pubs.
Our partners are free to innovate and create a pub
environment that refects their own ideas about what
matters to their guests. Their passion to run the pub creates
unique pubs which are prized by their communities.
Marston’s helps support that passion by offering a range
of agreements so that the terms are an appropriate ft for
their business model. This year, we have expanded our
agreements to offer one similar to our existing franchise,
enabling the partner to operate their own food menu.
This is particularly suited to food entrepreneurs who want
the freedom and fexibility to develop and grow their
own food offering.
Having a large managed pub estate means that we are
able to share our existing tools and learning platform with
our partners. This year we launched Marston’s Campus to
our partners, sharing the training we have created for our
managed teams at no extra cost to them. This has proved
very popular since launch.
38
Our partner strategy
1. Choice/fexibility
The key to success is matching the right pub and the
right person to the right agreement. We take time to
understand the applicants for our pubs; ranging from
seasoned publicans with many years of experience,
to those who have never run a pub before but have a
burning ambition to do so. We offer a diverse range
of opportunities encompassing retail, tenanted and
leased pubs. The type of agreement offered refects
the experience, confdence and ambition of the
applicant. If we think that an applicant is unsuitable
then we are honest about that from the start,
recognising that mutual success can only be achieved
in a genuine partnership arrangement.
2. Training
All our partners are provided with induction training
and, once they have started, receive ongoing training
through programmes that provide continued support.
Running a pub requires knowledge of licensing,
regulatory, legal, health and safety and food hygiene
rules, many of which are particular to this industry and
are frequently changing. Our training includes
everything a new partner needs to know about pub
mechanics including cellar management, fnancial
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 available for
advice or an urgent need. Our partners beneft from
the range of experience held by our Area Managers,
offering suggestions and advice to support the
proftability of their businesses.
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 drinks range for
granted, constantly reviewing them, and we believe
that they represent the best quality and value for our
partners to offer their guests.
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 issues or queries to ensure that the
buildings are kept safe and inviting for guests.
Our refurbishment programme ensures our pubs
remain interesting, vibrant and safe places to visit.
Marston’s Campus
shared with our partners
This year we took the decision to not only
upgrade our in-house learning management
system, Marston’s Campus, for our Pub Support
Centre and our managed estate, but to extend it
to our partners in over 950 of our retail, franchise
and tenanted pubs. For our partners, the platform
provides the same e-learning courses, webinars
and training record cards as it does for our own
teams. It is at no additional cost to them and
aligns their businesses to our ways of working.
Through great training material and training
programmes, it’s an additional tool to support
our partners.
“As an operator, having access to a learning tool
like Campus has made a dramatic difference to
my business. The system allows me to train my
team members to a very high standard and keeps
the team up to date on all relevant information.
Having the ability to add more courses to my
team as they progress through my business and
develop their own skill sets at their own pace is
priceless. When recruiting team members I fnd
this system is a selling point as it shows as a
business we are dedicated to our teams’
development and support. Set your team up,
do it as soon as you can and you will see the
benefts that Campus will bring to your business.”
Sarah Crombie,
Retailer at the Ferry Inn
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Our supplier relationships are at the heart of our success
As the country has emerged
from the pandemic the demand
on supply chains has been
pronounced. Labour shortages,
driver shortages, product
scarcity, rising commodity
prices and energy costs have all
impacted many of the suppliers
we deal with. Marston’s is not
immune to these pressures, but
we have worked collaboratively
with our suppliers during the
year to reduce the exposure
and find solutions.
As a consequence, the supplies to our pubs have
remained very strong, close to full fulflment of orders.
Certainly, having long-term, often single-supplier
relationships, has increased our resilience to
short-term shocks.
At a time when many of our suppliers’ businesses were
fundamentally impacted by the pandemic, they have
worked tirelessly to support Marston’s, for which we
have tremendous gratitude. Our businesses have had to
cope with periods of local restrictions, another lockdown
imposed with only short notice, followed by an
acceleration in demand upon reopening. Our pubs
were exceptionally busy during bank holidays, but our
suppliers responded admirably, and the pubs did not
experience any signifcant shortages.
39
Despite the adversities and uncertainties in the current
market we have been successful with our suppliers in
negotiating and renewing contracts for our core food
supplies such as meat and fresh produce. This has
demonstrated the commitment of our main suppliers to
work through the wider issues impacting upon UK
suppliers at the moment. We seek to work with
suppliers who refect our own corporate values,
which is demonstrated during the selection process
and supported by accreditations. 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 proftability for both ourselves and our
suppliers. Our supplier selection process is designed to
ensure that enough information is shared between the
parties and the arrangement is mutually advantageous.
Knowledge of our suppliers and the proactive
relationship involving them 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.
Our drinks supplier: Carlsberg
Marston’s Brewing Company (CMBC)
From October 2020 CMBC became the single supplier
of drinks into Marston’s pubs. Our businesses have
worked within the framework of a Transitional Services
Agreement which has supported both parties, while
functions have separated into the new entity. CMBC has
kept its levels of supply into the pubs very high, achieving
a 100% order fulflment rate despite wider supply chain
challenges post lockdown. The shortage of CO2 has
once again been a problem in the country. This gas is
used in CMBC’s production process, but it is also
delivered by CMBC to our pubs to dispense drink.
The shortage is now abating following the Government’s
assistance to the CO2 industry.
Food Supplier Charter
Our guests expect a high level of diligence in the
sourcing of goods, products and services, to ensure that
quality and standards are at the right level, encouraging
suppliers to improve their standards where appropriate.
We clearly communicate this level of standard required
through our Supplier Charter. This sets the standard to
which we audit our suppliers, albeit audits at our
suppliers’ sites this year were prevented during
the lockdown.
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 is updated each year and includes the
Offce for Health Improvement and Disparities (OHID)
2024 salt targets and calorie targets. Our suppliers work
with us to achieve these targets, particularly when new
items are launched.
Impact of border controls
The UK Government has delayed the border checks on
all goods coming from the EU until January 2022.
The UK’s infrastructure necessary for these checks is in
progress, however, given the other post pandemic
factors currently disrupting businesses, the Government
recognised that this delay was necessary. The delay suits
the pub trade as it moves the implementation beyond the
busy Christmas period into the early months of the year
when trade is quieter. No rehearsal of these border
checks has been conducted so, at present, the effciency
of the system deployed and any necessary, additional
administration is unknown. The smooth operation of these
checks is of importance to our business, particularly for
the importation of fresh food.
Ethical sourcing
Our preference is to select suppliers who like ourselves
seek to reduce their environmental impact, thereby
reducing our supply chain carbon footprint.
CMBC launched a new sustainability programme this
year, with plans to eliminate carbon emissions by 2030,
and halve water usage. This is a global campaign by the
Carlsberg Group called Together Towards Zero aimed
at Zero carbon footprint, Zero water waste, Zero
irresponsible drinking and Zero accidents. The frst goal
is to target carbon emissions from breweries and their
wider supply chain. They also aim to source 100% of
their electricity from renewable sources by 2022.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Finding solutions with our suppliers
A.F. Blakemore handle the logistics for all of our food deliveries to our pubs. Our individual food suppliers
deliver into Blakemore, where the food is stored and then picked to order. During periods of lockdown,
we have worked with Blakemore to fnd mutual solutions for problems encountered, particularly those that
reduce stock levels and protect margins. Despite shortages of some food items, together with Blakemore
we have maintained an order fulflment rate to our pubs of 94% on food. In some cases, this has been
achieved by substituting food items, while always maintaining the quality and safety of the food. This creates
operational demands for us and Blakemore, however, our strong relationship and mutual co-operation has
successfully kept our pub orders fulflled.
Modern slavery
We are full members of SEDEX, which is a platform used
by many companies to share information on ethical
trading, including employment conditions. During the
year we reached out to existing suppliers on SEDEX to
share this information.
Our existing food suppliers are prompted by our new
food information system to initiate the sharing of ethical
data on SEDEX. The data shared by suppliers includes
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.marstonspubs.co.uk/responsibility
Progress against key targets
1. Development of a food information system
NTAssure were appointed to develop an integrated
smart food information system to record information on
our suppliers’ food and drink products. This new system
improves the accuracy of data collected from our
suppliers by removing manual processes and, in turn,
enhances the information provided to guests. The system
went live with our suppliers in July. It will take time to
incorporate all our suppliers’ ingredient data; this is
expected to complete during 2021/22 for all food
items. Work has also commenced with our drinks
suppliers to capture the requisite allergen data.
We are now looking to expand the food information
system to provide more live information to guests either
on our website or a tablet, specifcally around allergens.
2. Allergen training
Last year we launched a bespoke e-learning course
for providing allergen information to guests within the
guest journey. Our policies and procedures relating
to allergens have been reviewed by Anaphylaxis
Campaign and Food Allergy Aware. This year we have
initiated an allergy audit of our managed pubs. The audit
will focus upon our food-led pubs and will involve an
unannounced visit in order to provide feedback to our
pub teams on how the guest experience was delivered.
40
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Committed to reducing environmental impact
Our plan to achieve Net Zero
by 2040 can be summarised
as follows. We aim to achieve
carbon neutrality for our direct
carbon emissions (Scope 1
and 2) by 2030. This is bold but
achievable. At the same time we
will be working with our supply
chain to reduce our indirect
emissions (Scope 3) to achieve
total Net Zero by 2040.
We are a member of the Zero Carbon Forum (ZCF)
which is supported by UK Hospitality and the BBPA.
Working together we have developed a Net Zero plan
that is in step with our market sector. The forum has written
an industry roadmap to Net Zero, which will assist us in
developing our own pathway.
The ZCF’s data fndings for the pub sector show that 9%
of emissions come from Scope 1 and 2 (e.g. fuel and
electricity consumed directly) and 91% of emissions are
associated with Scope 3 (e.g. purchased goods and
services and logistics). The key challenges for ourselves
and our supply chain include decarbonisation of heat
generation, goods and services procurement of lower
carbon alternatives, and logistic operations needing
to move to renewable fuels. There is likely to remain
residual emissions that cannot be reduced or removed
and these will need to be offset.
To achieve Net Zero, future business decisions will need
to take into account the effect on emissions. As the
Group proceeds on its path to Net Zero, operating costs
could increase in the short term, but making these
adjustments sooner will mean the Group is in a
competitive position for the future and should reduce
its long-term costs.
We have established a Net Zero working group
reporting to the ESG Committee, to formulate and
deliver the Net Zero strategy. This group will comprise
relevant individuals from across the business that are
responsible for the different emissions areas.
External data validation will be collected in order to
verify our progress. We will also evaluate whether the
Science Based Target initiative (SBTi) can improve
the clarity of our emissions targets as we progress.
In recent years 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 approach to ESG. 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.
Taskforce on Climate-related Financial
Disclosures (TCFD) reporting 2022
Next year we will produce our frst TCFD report on the
impact that the climate could have on our fnancial
reporting. We are already collecting data on food risk
for all our pub sites in order to model how they may be
affected in the future. Currently only a small percentage
of our sites occasionally food, the cost of which is
covered by our insurance. Climate change could impact
the frequency and severity of foods and therefore could
increase the cost of insuring our properties. The report
will also explain the Group’s progress to Net Zero and
any practical measures taken to protect our properties.
Other areas of focus this year
• We are in the process of fnalising a power supply
contract for the business, which will see us move to
electricity backed by Renewable Energy Guarantees
of Origin (REGO) certifcates from April 2022.
This will be a key step to our journey to Net Zero.
• Our water self supply licence, ‘Marston’s Water’,
allows us to take control of water management and,
with increased water meter readings, we can ensure
all sites are billed in line with consumption.
Currently we estimate that through our careful
management and monitoring we are saving over
81,000 pints of water a day.
• We are the UK’s frst pub company to roll out
50kW rapid chargers across a nationwide estate.
We have now committed with Osprey to install a
further 100 rapid electric vehicle (EV) chargers in
our pub car parks, on top of the 104 installed to date.
The chargers are powered by 100% renewable
energy and can provide an EV with around
80 100 miles of range in 30 minutes.
• We continued to innovate by trialling new
-
technologies aimed at reducing the energy and
lifecycle impact of equipment installed in our pubs.
As part of our refurbishment and re-segmentation
programme, we are continuing to invest in energy
effcient appliances, LED lighting and building
control optimisation.
• During the lockdown we reset our building
management systems and helped our pub managers
to close down equipment and reduce consumption.
We then monitored energy and water consumption
of the closed sites to identify those with higher than
average usage in order to take action to reduce it
down further. Additionally, waste collections were
stopped where possible and washroom services
were suspended.
41
• We recycle almost all our dry mixed waste and glass.
Over three quarters of our food waste is recycled.
Our total recycling rate is 78% (2020: 73%) and we
continue to send zero waste to landfll.
• We have commenced a programme of placing
clothes banks in pub car parks, diverting old clothes
from landfll, and we are keen to extend this to more
sites next year.
Green Apple Gold Award 2020
The Green Organisation is dedicated to promoting
environmental performance and recognises best
practice around the world. In 2020 Marston’s won
the award for sustainability.
We have also been shortlisted this year for the
National Recycling Award.
Greenhouse gas emissions
(including Scope 1 and 2 and Scope 3 emissions
relating to the supply of drink by CMBC/
business mileage.)
Source
Electricity and gas
Petrol and diesel
Refrigerants
LPG
Oil
Total
2021
2020
CO2 tonnes
71,297
8,866
5,039
1,873
302
87,377
CO2 tonnes
79,491
12,031
5,162
2,118
160
98,962
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Hat-trick of awards for our Energy team
Marston’s has won three awards at the 2020/2021 International Green Apple Environment Awards for our
environmental work across the pub estate and more recently our transformation in reduction of waste across
the SA Brain’s pub estate.
The Company was acknowledged as a Green World Ambassador for Best Environmental Practice and
took home a Gold and a Silver from the 2021 awards in the Waste Management category for our work in
reducing emissions from waste and overall waste to landfll across 145 SA Brain pubs.
The Green Apple Environment Awards recognise and reward companies globally for the best environmental
practice. The award win for the SA Brain sites endorses the efforts of a four-year project which was
designed to maximise recycling and zero waste to landfll. The target which was met in 2018 by Marston’s,
becoming the frst pub group to achieve zero waste to landfll.
Chris White, Energy Manager said: “We are so proud of our team for receiving global recognition for
the work we have done in reducing waste. We continue to work harder and harder to ensure that as a
company, we are as environmentally friendly as possible and it is even more apparent now just how
important that work is to help us lead a sustainable future. Our partnership with Novati continues to help us
do just that, our mutual commitment to be fully engaged with innovation and technology has allowed us to
transform our waste management for the better.”
Alongside the award win, Marston’s winning paper will be published in The Green Book, the leading
international work of reference on environmental best practice.
Greenhouse gas emissions intensity ratio
CO2 tonnes per
£100k (turnover)
Energy usage
Scope 1 and 2
Scope 3
Total
Notes:
2021
2020
16.97
12.05
2021
mwhrs
346,892
64,947
411,839
2020
mwhrs
441,564
6,427
447,991
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 2021,
in accordance with the Streamlined Energy and Carbon
Reporting regulation.
3.Total gas consumption compared to last year reduced by 3% which
reflected the temporary shutdown of our pubs during the Winter.
Electricity consumption decreased by 18%, usage for lighting fell during
the lockdown. Fuel usage fell by 26% due to the periods of lockdown
when deliveries to the pubs were suspended. Fuel usage became
a Scope 3 emission from November to June 2021 following the
commencement of CMBC.
4.To reduce the energy consumed we focus 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 install LED lighting in all the internal
areas and use integrated movement sensors in our back of house
areas, reducing the operational hours of lighting. We also fit voltage
optimisation in all of our new-builds and have retro-fitted them into other
sites across the estate.
5.The Greenhouse gas emissions intensity ratio has been distorted by
the pub lockdown, and the reduced turnover of the business. While
we have taken steps to reduce energy usage in our pubs during the
lockdown, we still had to maintain refrigeration, heating and lighting,
particularly in those pubs where the manager lives on site.
42
Progress against key targets
1. Food waste
We will continue with the training and awareness campaigns
for our team members to encourage them to minimise
wastage and to segregate waste to maximise recycling,
recognising that our performance can always be improved.
We are now in a position where all food waste from the
pubs can be measured by our waste collector. In future
we will be able to monitor reductions in food waste and
the effectiveness of our campaigns.
We have also engaged with WRAP to increase our
commitment to work with our suppliers to reduce
packaging waste associated with food.
Our next action is to increase our understanding of the
volume and nature of food waste generated within our
business and in our supply chain. This will allow us to set
future targets for its reduction and we intend to report our
progress on these targets.
2. CO2 emissions reduction
Our current emissions target is to reduce our carbon
emissions relative to the turnover.
The performance this year has been distorted by the
pub lockdown. We 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. Our commitment to Net Zero emissions
will in future years necessitate replacing kitchen
equipment powered by renewable energy.
In future our target for emissions will be the Net Zero
targets explained above. We are currently considering
whether to adopt Science Based Targets, recognising
that they are becoming the standard approach to
provide a clearly defned pathway to reduce emissions,
helping to prevent the worst impacts of climate change
and to future-proof business growth. Targets are
considered ‘science-based’ if they are in line with
what the latest climate science deems necessary to
meet the goals of the Paris Agreement.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Growing and Strengthening our Resources and Relationships continued
Engaging with
our investors
Engaging with
Government
We want to attract long-term
equity and debt investors
who believe in and support
our strategy.
In a year disrupted by the pandemic, our engagement
with investors has been mostly online, maximising the use
of video technology, for presentations of our year-end
and half-year results. Our Annual Report and website
continue to hold detailed information on our business
strategy and results, its governance and corporate
responsibility. Owing to Government restrictions, we
were not able to host an in-person AGM but strongly
encouraged shareholders to vote online and submit
questions on the resolutions, ahead of the meeting.
For the 2022 AGM, shareholders are able to attend the
meeting in person. Whilst we currently anticipate this will
be possible, we are committed to following applicable
Government guidance, and any restrictions in place,
as at the date of the meeting. More information can be
found in the 2022 Notice of Meeting (available on our
website www.marstonspubs.co.uk/investors).
Further details of how we have engaged with
shareholders and the key topics discussed are set out
in the Corporate Governance Report on page 50.
Here we have summarised our engagement with our
debt providers.
Whilst receipt of the initial proceeds of £228 million
from Carlsberg, upon the disposal of Marston’s Beer
Company has reduced overall debt levels and improved
headroom in our bank facilities, the continuing impact
of COVID-19 on our operations has necessitated
seeking further covenant waivers from our bondholders.
Our CFO and Director of Treasury and Tax continued
to engage regularly with our bank syndicate and
bondholders to ensure they understood the ongoing
impact of COVID-19, the mitigation measures we
applied to preserve our cash resources and the
long-term viability of the business. They have welcomed
the opportunity to hold direct meetings where
bondholders have initiated contact.
Holding regular meetings with our banks and private
placement facility holder has helped to ensure that our
providers of fnance continue to demonstrate their
support throughout the period and their understanding of
the need to grant waivers and amendments to covenants
when requested. 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.
Areas of focus
• Cash preservation measures.
• Secured waivers and amendments to bank, private
placement and securitised facilities for the fnancial
periods up to and including 1 January 2022.
• Using existing bank facility to fnance the rent roll for
the SA Brain’s estate.
Government policy decisions
impact the Group and,
directly and indirectly, all of
our stakeholders.
Throughout the year, we continued to rely on
Government support through reduced VAT, the business
rates holiday and other tax concessions. This support
remains essential in retaining the majority of our
workforce. As the outlook remains uncertain, we have
urged Government to consider the major contribution
that pubs make to the economy and the communities in
which they serve.
The Group maintained its engagement with Government,
primarily through its membership of the BBPA and UK
Hospitality but also directly, through Government
consultations. Yet again, much of our engagement
focused on the impact of COVID-19 and the resulting
Government restrictions on our ability to trade but we
also continued our work with Public Health England, the
Offce of Health Improvement and Disparities (OHID)
and Drinkaware. We take our responsibilities for the
health and wellbeing of our guests very seriously and
ensure we prepare well for all new legislation, as it
affects our business. Our teams are dedicated to food
and drink safety and compliance and, with the help of
the Risk & Compliance Committee, we monitor emerging
legislation and regulation to assess what preparations
are required.
Areas of focus:
• The impact of COVID-19 on our people, our partners
and our communities.
• Contributed £99.9 million (2020: £384.6m) in taxes
to the Government.
• Consulted on the draft guidelines for calorie labelling
which will be compulsory from April 2022.
• In readiness for Natasha’s Law, effective October
2021, we reviewed all food offerings across the
estate to assess the impact, providing training or
different products to ensure compliance.
• Working towards the 2024 salt reduction targets set
by the OHID.
43
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Non-Financial Information Statement
The information set out below,
together with signposts to other
relevant sections of the Annual
Report, is intended to assist
users in understanding the
Group’s position and approach
to the following key non-
financial matters: environment,
employees, social matters,
respect for human rights,
and anti-corruption and anti-
bribery matters.
Non-fnancial information
Environment
People
Communities
Business Model
Principal Risks
KPIs
44
41
33
37
9
24
17
Our values and culture underpin our Business Model
and defne our ways of working and the behaviours we
expect of our people. We aim to provide a safe working
environment for all our people and a business that is run
in an ethical and responsible manner. 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 fve key
non-fnancial matters are pandemic, health and
safety, food safety and political and economic risk.
The following govern our approach to these
non-fnancial 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.
• Our Anti-bribery and Corruption policy sets out our
commitment to conducting our business operations in
a fair and ethical manner and our zero tolerance
approach to any form of bribery or corruption from
our people, suppliers or any third parties. 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
reviewed, updated and briefed to our teams to refect
the latest guidelines and impact of COVID-19
restrictions as and when they changed.
• The development of our online training platform
Marston’s Campus 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.
Marston’s code of conduct, The Marston’s Way, is
shared with all our employees on our intranet and
website and includes links to relevant policies, many of
which can be viewed publicly, including the following:
• Anti-bribery and 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.marstonspubs.co.uk/responsibility
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.marstonspubs.co.uk/responsibility
A combination of training, compliance testing, internal
and external auditing and assurance gathering,
contributes to the due diligence of the policies that
support our approach to the fve key non-fnancial
matters. The Risk & Compliance Committee reviews
the principal risks, conducts deeper dives into singular
areas of risk and tracks emerging legislation and the
potential impact on the business. The Committee
considers the internal audit plan and the audit results.
Compliance testing is carried out by Internal Audit; the
results from which are considered by the Committee.
Compliance to legislation and the Company’s policies
is also tested.
Due diligence activities during the year have included:
• Anti-money laundering controls testing and
awareness training
• Pubs Code compliance
• Pub fnancial audits
• External pub safety and food supplier audits
• External verifcation of energy emissions
• Review of our ‘Speak Up’ policy and reports by
the Audit Committee.
Information for our people is available from the
following sources:
• People Strategy
Summarised on page 34.
• 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 employees 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.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Section 172 (1) Statement
The Board are aware that whilst the threat and impact
arising from COVID-19 remains, and with it future
uncertainty, they consider that their actions and decisions
to date have been made in the interests of all relevant
stakeholders in preserving the business for the beneft of
its members as a whole.
Approach by Platinum Equity Advisors
In December 2020, the Board received an unsolicited
non-binding approach from Platinum Equity. Their letter
set out an indicative cash offer to acquire 100% of the
Company. The Board met to consider this approach
and, with assistance from their fnancial advisers,
reviewed the indicative value attributed to the Company.
On the basis that the fnal indicated proposal
represented a discount to the share price at the start of
2020, pre-COVID, and since that time the Company
had realised signifcant value from the creation of a
partnership with Carlsberg, announced the agreement to
operate the SA Brain estate, and embarked on its newly
focused pub strategy, the Board did not consider
pursuing this approach to be in the best interests of
shareholders and therefore rejected the proposal.
managers and Board papers covering relevant
stakeholder interests when considering proposed courses
of action. When visiting our pubs, the Directors spend
time with our pub teams and with senior managers who
attend Board meetings from time to time. Additionally,
the Board receives feedback from employee surveys
and regular briefngs from the CEO and Group HR
Director. Engagement with suppliers, customers and
other stakeholders takes place at an operational level
through the relevant senior manager with the Board
receiving updates via the Executive Directors.
The interests of employees, investors and other
stakeholders are taken into account by the Board in all
decision making but particularly so when considering
matters of strategic signifcance. When making such
decisions, the Board considers carefully how it would
promote the success of the Company, its long-term
impact (fnancial and non-fnancial) and has due regard
to the other matters set out in section 172 (1). During the
period, the impact of the pandemic continued to
dominate the Board’s attention; other signifcant
decisions made during the period related to the
approach by Platinum Equity Advisors, the transaction to
operate the estate of SA Brain and the appointment of a
new CEO and a new CFO. Further details relating to the
appointment of both Executive Directors can be found in
the Nomination Committee Report, on page 54.
Operation of the SA Brain estate
In December 2020, the Company announced that it
had reached agreement with SA Brain to operate its
pub estate in Wales following collaborative discussions
with the Company. Whilst the Board were sure of the
benefts to its own shareholders, the talks also focused
on preserving the freehold capital for the stakeholders
of SA Brain, protecting the strong heritage, brand name
and safeguarding the jobs of c.1,300 people in
the pubs.
The Directors considered the proposals as being of
beneft to those employed by SA Brain and benefcial to
the communities in which the pubs operate. To preserve
the provenance of the Welsh pubs, the commercial
(marketing) manager has been retained along with an
agreement to use the SA Brain’s brand for the duration
of the lease.
Further, the Board were confdent that the deal was
consistent with its long-term strategy as a focused pub
operator to grow the business without impacting on its
fnancial strategy to reduce borrowings; the agreement
received the unanimous support of its lenders.
COVID-19
For more than half the year, the Board has continued
to monitor and consider the ongoing impact of the
pandemic on the business. Most notably on our people
but also the fnancial stability of the business and its
sustainability. Acknowledging the fnancial support
provided by Government, the Board have received
regular updates from management on the continuing
focus of engaging with our people. Mindful that the
fnancial support was fnite, the Board have considered
in detail the impact on the business from restricted
trading, the gradual opening up of the sector and the
challenges that differing rules and restrictions enforced
by the respective devolved administrations have brought
to our operations. Plans and forecasts have been
regularly updated throughout the period to incorporate
changes to closures, gradual reopening and the level
of Government support; the aim being to strike the right
balance between cash preservation and timely
investment ahead of reopening. Throughout the year,
careful cash management and working with its partners,
has enabled the Group to meet all its scheduled
payments to banks and bondholders, its suppliers
and people.
The long-term success of
the Company is inextricably
linked to the strength of our
relationships with our key
stakeholders. Their interests
shape our performance and
influence the way we make
decisions. Long-term value
creation is about more than
financial results alone and
those key stakeholders help
create and share in the value
generated. The Company’s
stakeholders are set out in Our
Business Model, on page 9, with
further details of how we have
engaged with each throughout
the period, in our Resources
and Relationships section of the
report, on pages 32 to 43.
During the period ended 2 October 2021, the Directors
consider that they have acted in a way that promotes the
long-term success of the Company for the beneft of its
members as a whole and have had regard to the
various factors set out in section 172(1) (a) to (f) of the
Companies Act 2006. The information found here and
within the Resources and Relationships section forms our
Section172 (1)statement.
The Board recognise the value of engaging with
stakeholders to understand their views and interests so
that they may be properly considered in the Boards’
decision making. They do this through various methods
including direct engagement, regular briefngs from the
Executive Directors, the PLC Exec and other senior
45
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Strategic Report
Governance
Financial Statements
Additional Information
Governance
Chair’s Introduction
Board of Directors
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report:
Annual Statement
Remuneration Summary 2020/21
Annual Report on Remuneration
Directors’ Report
Statement of Directors’ Responsibilities
47
48
50
54
57
59
59
63
64
73
75
Female representation on
the Board
50%
Tenure of Chair and
Non-executive Directors
0–3 years
3–6 years
6+ years
46
Balance between Executive
and Non-executive Directors
Chair
Executive
Non-executive
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Chair’s Introduction
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 and the changes to the Executive leadership
of our business.
Whilst the challenges and impact of the COVID-19
pandemic on our business have continued through
the reporting year, I have been delighted to see that
the special and unique culture at Marston’s remains
resilient and is thriving as we return to more normalised
trading. Our people are passionate and committed to
their role in making our business a success. The Board
1. Board Leadership and Company Purpose
(page 50)
How we engage with our people and our shareholders
and what has been on the Board’s agenda this year.
2. Division of Responsibilities (page 52)
Our governance framework and management structure.
Further details of responsibilities can be found on our
website www.marstonspubs.co.uk.
3. Composition, Succession and Evaluation
(page 53)
Our approach to succession planning, training
and induction, this year’s Board evaluation and our
approach to diversity.
4. Audit, Risk and Internal Control (page 56)
Internal processes and our Audit Committee Report.
5. Remuneration (page 59)
The application of our current Directors’ Remuneration
Policy and payments made to Directors during
the period.
recognise and seek to demonstrate the same values and
behaviours that we see frst-hand throughout Marston’s,
in our discussions and in every decision that we make,
for the beneft of our business and our stakeholders.
Our vision, goals and priorities are clear, and our
governance framework supports the pursuit of these.
With the appointments of Andrew Andrea as CEO,
Hayleigh Lupino as CFO and the further development
of our PLC Executive and Leadership Group, during the
year, we have confdence in the future.
The 2018 UK Corporate Governance Code (the ‘2018
Code’) has applied throughout the reporting period
under review and the Board considers that we have
fully complied with the principles and provisions of
the Code. Further explanation of this is set out on the
following pages.
Board effectiveness and succession
We announced during the year that Ralph Findlay,
our long serving CEO, would retire from the Board
at the end of the reporting year and, subsequently,
that Andrew Andrea had been appointed CEO.
Hayleigh Lupino was appointed as CFO; both
appointments were effective from 3 October 2021.
Succession planning remains an important part of
the governance cycle and I am pleased that both
appointments were internal candidates. We continue
to monitor the composition of our Board being mindful
of the benefts that an external perspective can bring.
The Board has commenced a search for an additional
Non-executive Director; further details can be found
within the Nomination Committee report on page 54.
Carolyn Bradley stepped down from the Board on
31 July 2021, after seven years, and I thank Carolyn
for her insight and contribution to Marston’s during her
tenure. Octavia Morley assumed the role of Senior
Independent Director following Carolyn’s departure.
This year we carried out an internal Board evaluation
of the effectiveness of the Board and its Committees.
More details and the summary of our fndings, as well
as progress on the actions from the 2020 evaluation,
are set out on page 55.
Profles of each Director can be found on pages 48
and 49.
Remuneration
Our remuneration principles remain unchanged.
We aim to provide remuneration that motivates our
people without encouraging excessive risk taking, with
incentives aligned to strategy that encourage enhanced
and sustainable performance. During the reporting year,
the Committee has considered remuneration and reward
across the organisation, particularly in the context of the
ongoing impact of COVID-19, how to motivate and
reward in challenging circumstances and considered
and approved the remuneration packages for the
incoming CEO and CFO. Details of how the Directors’
Remuneration Policy has been applied during the year,
are set out in the Directors‘ Remuneration Report on
pages 59 to 72.
Audit
The principal responsibility of the Audit Committee
continues to be the integrity of our fnancial reporting
and internal controls. The report from the Audit
Committee is on pages 57 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
Chair
UK Corporate Governance Code
compliance statement
The July 2018 UK Corporate Governance Code applied
to the 2020/21 reporting period. The 2018 Code is
available on the Financial Reporting Council’s website:
www.frc.org.uk
Marston’s PLC was compliant with the principles and
provisions of the 2018 Code throughout the reporting
period under review.
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. In order to provide
a more accessible report, and to avoid repetition,
more information can be found on our website
www.marstonspubs.co.uk
47
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Board of Directors
Chair
Executive Directors
Senior Independent Director
N*
N
William Rucker
Chair
Andrew Andrea
Chief Executive Offcer (CEO)
Hayleigh Lupino
Chief Financial Offcer (CFO)
A
N
R*
Octavia Morley
Non-executive Director
Independent
Yes, on appointment
Appointed to the Board
October 2018
Independent
No
Appointed to the Board
March 2009
Independent
No
Appointed to the Board
October 2021
Independent
Yes
Appointed to the Board
January 2020
William is a Chartered Accountant with experience in banking
and financial services. He is Chairman of Lazard in the UK and
brings a wealth of knowledge and experience of financial
markets, corporate finance and strategy to his leadership of the
Board. William is also currently Chairman of the UK Dementia
Research Institute. William’s City and financial experience,
alongside his strong stakeholder management skills, ability to
help businesses grow and his previous Chairman roles, make him
ideally placed to be Chair of Marston’s.
Past experience
Chairman of Crest Nicholson Holdings plc
Chairman of Quintain Estates and Developments
Non-executive Director of Rentokil Initial plc
Andrew was appointed CEO from 3 October 2021, having
previously been Chief Financial and Corporate Development
Officer since 2016. 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 then appointed to the Board as Finance
Director in March 2009. He is also currently a Non-executive
Director at Portmeirion Group PLC and a Non-Executive
Director of CMBC. Andrew is a qualified Chartered Accountant
and brings to the Board experience gained in financial and
commercial roles, including strategy and leadership, risk
management and mergers and acquisitions.
Past experience
Roles held at Guinness Brewing Worldwide, Bass Brewers
Limited and Dolland & Aitchison
Hayleigh was appointed CFO of the Group from 3 October
2021, having previously been Director of Group Finance and
held a number of senior roles for Marston’s Beer Company.
Most recently, she played a key role in creating the partnership
between Marston’s Beer Company and Carlsberg UK. She is
currently a Non-Executive Director of CMBC and is the project
lead for Marston’s on the Transitional Services Agreement,
to ensure a smooth transition with the integration plans.
Hayleigh is also a Trustee Board Director at the Wolverhampton
Grand Theatre.
Past experience
Senior roles held within Marston’s PLC
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 areas of retail.
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
Board Committees:
A
Audit Committee
R
Remuneration Committee
N
Nomination Committee
*
Denotes Committee Chair
48
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Board of Directors continued
Non--executive Directors
Group Secretary
A*
N
R
A
N
R
Matthew Roberts
Non-executive Director
Bridget Lea
Non-executive Director
Anne-Marie Brennan
Group Secretary
Independent
Yes
Appointed to the Board
March 2017
Independent
Yes
Appointed to the Board
September 2019
Matthew has significant real estate and retail experience having
previously been CFO and then CEO of Intu Properties plc,
until June 2020. Matthew is a qualified Chartered Accountant
(FCA) and has recent and relevant financial experience,
enabling him to contribute effectively to the Group as the Chair
of the Audit Committee.
Bridget is currently Managing Director – Commercial at BT
Group having previously held the role of Managing Director
(North) at J Sainsbury plc. Bridget has had a distinguished
career working across multiple leading retail brands and held
senior positions, spanning a wide range of disciplines including
sales, operations, marketing, supply chain and digital within
retail corporates.
Past experience
Chief Executive Officer and Chief Financial Officer of Intu
Properties plc
Past experience
Managing Director (North) at J Sainsbury plc
Chief Financial Officer of Gala Coral Group Limited
Director of Stores, Online and Omnichannel at O2
Finance Director of Debenhams plc
Appointed as Secretary
October 2004
Anne-Marie joined the Company in 1998 as Group Tax
Manager. A qualified Chartered Accountant and Chartered
Secretary, she was appointed Secretary in 2004.
Board Committees:
A
Audit Committee
R
Remuneration Committee
N
Nomination Committee
*
Denotes Committee Chair
49
Nomination Committee membership
William Rucker (Chair)
Octavia Morley
Matthew Roberts
Bridget Lea
Ralph Findlay (until 2 October)
Andrew Andrea (from 3 October)
Audit Committee membership
Matthew Roberts (Chair)
Octavia Morley
Bridget Lea
Remuneration Committee membership
Octavia Morley (Chair)
Carolyn Bradley (until 31 July 2021)
Bridget Lea
Matthew Roberts (from 20 October 2020)
Terms of reference, for each Committee, are
available in the Corporate section of our website
www.marstonspubs.co.uk
Board departures announced during
the year
• Ralph Findlay stepped down from the Board and
retired from the Group as CEO, on 2 October 2021,
having served on the Board for more than 20 years.
• Carolyn Bradley also stepped down as
Non-executive Director and Senior Independent
Director on 31 July 2021.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
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 satisfed that it refects and,
in turn, is refected by our purpose, our values and our
behaviours; all of which are aligned to our strategy
which has been developed to represent the pub focused
business. The Board monitors the culture and values of
the business in a variety of ways:
• Meeting and talking with teams from across
the business
• Reviewing the results of employee surveys, specifcally
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
50
and business decisions are made for the beneft 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.
Unfortunately, as a result of ongoing COVID-19
restrictions, the employee engagement sessions that
were planned for 2021 were not able to recommence.
Instead, our teams focused on the reopening of our pubs
and the implementation of our strategy. Plans to resume
the programme are in progress, with sessions planned
in 2021/22, ensuring that all areas of the business are
represented, and geographies covered.
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, so that we
remain focused on supporting our pubs and our teams
to deliver great experiences to our guests. We use
a variety of media through our core channels which
include print, digital, social and email and, during
the year, launched Yammer which enables all of our
people to be connected, sharing ideas and successes,
in a way that was not possible previously. During the
continued lockdown periods, the Board were updated
on arrangements for employees, made aware of
the programme of communication and the focus on
employees’ wellbeing and ensuring all were kept
informed as far as possible.
Following the launch of the ‘Your Voice’ surveys last year,
the programme of more frequent and shorter punchier
surveys has continued. Local management and team
leaders have more immediate access to survey results,
enabling them to act quickly on the outcomes. The wider
output from these surveys is discussed at Board meetings
during the year, with presentations from our HR team.
More details of the programme can be found on
page 34.
Following Carolyn Bradley’s departure from the Board
in July and Octavia Morley assuming the role of SID,
Bridget Lea has taken on the role of designated Non-
executive Director for engagement with our workforce.
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
fnancial PR advisers. The views and any concerns are
considered by the Board and, in particular, whether
any action or response is appropriate. The Chair and
SID make themselves available for meetings with
the Group’s major institutional investors each year.
Regular announcements on business and fnancial
performance are issued to the stock market and made
available on the Group’s website.
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. All meetings this year have been either by
telephone or video call. These calls have covered the
interim and preliminary results, the partnership with
Carlsberg, COVID-19 and the approach from Platinum
Equity Advisors. During this year, investor focus has been
on liquidity and fnancial viability and the CEO and
CFO have worked hard to reassure investors by setting
out the impact of restrictions and closure, the fnancing
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, fnancial 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.
Subject to any COVID-19 restrictions in place, we
are planning for the 2022 AGM to be held at the
Farmhouse at Mackworth in Derby, one of our own pub
sites. Shareholders will be invited to attend in person if
they wish, subject to restrictions, which will continue to
be monitored ahead of the meeting. Shareholders will
again be given the opportunity to ask questions ahead
of the meeting, using a dedicated email address
(agm@marstons.co.uk) if they are unable to attend
in person. We will ensure that each question receives
a direct response, with those questions pertinent to the
business of the meeting published on our website.
To enable all shareholders to vote on all resolutions
in proportion to their shareholding, the voting at the
2022 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 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 the website. The Board looks forward to meeting
shareholders once again.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Corporate Governance Report continued
Shareholder engagement summary
Key communication channels
Institutional shareholders and analysts
• Rolling investor relations programme
• Bi-annual written feedback received
• Chair and SID available to meet with
largest shareholders
Private client fund managers
• Regular meetings with CEO and CFO
Private shareholders
• AGM
• Annual Report and Accounts
• Website
Analysis of shareholder register by investor type
Private Fund Managers
29.87%
Private Investors
6+ years
Institutional
9.54%
60.59%
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 vision and goals. Regular agenda items
include a number of regular reports updating the
Board on fnancial and operational performance,
people matters and shareholder analysis. The remainder
of the agenda comprises specifc 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 far right hand column.
Certain meetings on the annual calendar focus on
matters of a more transactional nature, allowing more
time for wider debate and consideration of more
complex matters during other Board meetings. This year,
the Board continued to meet regularly, supporting the
business during the ongoing COVID-19 pandemic
and the journey to reopening, with the focus moving
on implementation against the new strategic objectives
as a pub focused operator. The majority of meetings
during the year have been held online, with a number
of face-to-face meetings held since restrictions were
lifted in June. Going forward, a mixture of online, hybrid
and face-to-face meetings will be adopted. This will be
determined by the agenda and focus of a particular
meeting, the timings of senior management presentations
and workforce engagement sessions. The Board
value the presentations from PLC Exec members, the
Leadership Group and other senior managers around
the business, and these will continue.
51
2021 strategy day
The Board held its annual strategy day in Birmingham,
slightly later than in the normal Board cycle, to ensure
the sessions were held once the new Executive Directors
were in role. They were joined by the PLC Executive
Committee (PLC Exec) and members of the Leadership
Group, to consider the proposed journey to achieve the
corporate goals to be ‘Better than the rest’ and ‘Back to
a billion’. The key themes of the day covered:
• Developing and delivering the guest journey,
enabling teams to deliver a great guest experience
to be ‘Better than the rest’.
• Developing the existing pub estate and evolving our
partner agreements.
• Becoming a great place to work, recruiting,
retaining and developing people.
• Financial considerations: fve year fnancial plan to
get ‘Back to a billion‘.
Presentations were received from the pub Operations
Directors, the Group HR Director, and members of their
teams, together with the CEO and CFO, which informed
open discussions and debate with the Board.
On the Board agenda
Strategy and performance
• COVID-19 impact and reopening of pubs
• Bank facility fnancing and securitisation waivers
• Operation of SA Brain‘s estate
• Results, trading updates and Annual Report
and Accounts
• Guest-focused strategy, vision and goals
Guest focus and business operations
• Health and safety and COVID-19 safeguards
• Operating plans for 2021 and 2022
• Guest journey and simplifcation of offer
Shareholder focus
• Share price performance and investor relations
• Shareholder feedback
• Year-end engagement and AGM
• Share register analysis
• Approach from Platinum Equity Advisors
Governance and risk
• Risk and risk management
• Evaluation of Board and Committee effectiveness
• Governance Code, Pubs Code and other
reporting obligations
• Environmental, social and governance updates
• Delegated authorities and potential conficts of interest
Leadership and people development
• People strategy
• Employee engagement forum and surveys
• Executive succession planning
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Corporate Governance Report continued
2. Division of Responsibilities
Governance framework
There is a clear division of responsibility between the
roles of the Chair and the Chief Executive Offcer (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.marstonspubs.co.uk.
Chair
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 Offcer (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 refect the Group’s culture.
• leading the PLC Exec and senior management in
managing the business.
• ensuring the Board is aware of shareholder and
other stakeholder views.
52
The Board
Principal Committees
Audit, Nomination, Remuneration
Supporting Committees
Risk & Compliance,
Business Continuity,
Data Security,
ESG,
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,
Disclosure Committee
Enterprise-wide risk management
Our behaviours
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 suffcient time to consider them
before the meeting.
The three principal Committees of the Board deal with
fnancial 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 54, 57 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, two pub
Operations Directors, Commercial Marketing 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 third national lockdown and
the integration and operation of the SA Brain‘s estate.
The PLC Exec also considers property proposals, capital
investment and new initiatives; approves internal policies,
governance and fnancial matters within the authority
limits delegated annually by the Board.
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, our behaviours
and The Marston’s Way. The work of our supporting
committees is described in the Risk Management section
on page 30.
Documents available at:
www.marstonspubs.co.uk
• Articles of Association
• Matters Reserved for the Board
• Committee Terms of Reference
• Roles and responsibilities for each Board member
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Corporate Governance Report continued
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.
3. Composition, Succession
and Evaluation
Name
Andrew Andrea
Carolyn Bradley1
Ralph Findlay2
Bridget Lea
Octavia Morley
Matthew Roberts
William Rucker
Board
14/14
13/13
14/14
14/14
14/14
14/14
14/14
Nomination
–
3/3
2/2
4/4
4/4
4/4
4/4
Audit
–
4/4
–
4/4
4/4
4/4
–
Remuneration
–
5/5
–
5/6
6/6
6/6
–
1. Carolyn Bradley stepped down from the Board on 31 July 2021.
2.Ralph Findlay stepped down from the Board on 2 October 2021.
3.Hayleigh Lupino was appointed to the Board with effect from 3 October 2021.
Comprising independent Non-executive Directors
(NEDs), an independent (upon appointment) Chair and
two Executive Directors, all supported by the Group
Secretary, the Board continues to represent a balanced
combination of skills, experience and knowledge
pertinent to the industry and business activities.
Biographical details, together with length of service
and external appointments are disclosed on pages 48
and 49.
All of our Directors are expected to allocate suffcient
time to the Group to discharge their duties and
responsibilities effectively and this is reviewed with
the Chair, as part of the annual evaluation process.
Signifcant commitments of the Directors, outside of
Marston‘s, are disclosed to and approved by the Chair
prior to appointment and where there are any changes.
The Company‘s Articles of Association provide authority
to the Board, to authorise potential conficts of interest
and to impose any conditions it sees ft. Actual and
potential conficts are reviewed by the Board on an
annual basis.
All Directors are subject to annual re-election by our
shareholders after an annual Board evaluation. Each of
our NEDs are initially appointed for a three year term;
beyond six years, the appointment is considered on an
annual basis having regard to the tenure of the Board
as a whole. Where the Board considers it would beneft
from a change, or a retirement necessitates a change,
the Nomination Committee will lead the process for
new appointments. As previously announced in March
2021, Ralph Findlay stepped down from the Board on
2 October 2021, having served on the Board since
May 1996. Following an extensive process involving
internal and external candidates, the Board appointed
Andrew Andrea to the position of CEO. The resulting
vacancy for the role of CFO also followed a similarly
extensive process culminating in the appointment of
Hayleigh Lupino; both have been in position since the
start of the new fnancial year on 3 October 2021.
53
Having served on the Board since October 2014,
Carolyn Bradley stepped down from the Board on
31 July 2021. Following Carolyn’s departure, Octavia
Morley has assumed the role of Senior Independent
Director. We consider all our NEDs to be independent
and the charts on page 46 show the balance and tenure
of the Board.
Board training and development
Following the third lockdown when restrictions were
eased, the NEDs spent two days in trade with members
of the PLC Exec and senior management team to
better understand the current operational challenges,
post lockdown, and met with teams from the business.
The presentations given at Board meetings 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 are also able to attend external
technical seminars offered by professional advisers
and receive internal briefngs on emerging legislation,
compliance and regulatory matters as it relates to the
business. 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. Ahead of her appointment,
Hayleigh met with our advisers, fnance providers,
analysts and brokers as part of her induction.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Corporate Governance Report continued
Nomination Committee Report
Dear Shareholder,
This year has seen many changes for the Company and
its senior management team as it adjusts to operating as
a purely pub focused business. I am pleased to present
an update here.
continues to appoint on merit and ensures that its
recruitment processes incorporate the widest range of
suitable candidates from diverse backgrounds. As at the
date of this report, three of Marston’s six Board directors
are female, and four of the seven members of the PLC
Exec are female.
Evaluation and election
Having undertaken an externally facilitated evaluation
last year, this year we conducted an internal assessment
of the Board and its Committees using a combination of
a questionnaire and individual conversations with each
Director. The NEDs met to consider my effectiveness
as the Chair of the Board and, in my individual
conversations with each Director, we discussed their
contribution and any development needs. Details of
the conclusions together with an update on the 2020
recommendations are set out on the following page.
I am satisfed that the Board has a good balance of
experience, skillset and fresh thinking to help steer
the Company as a newly focused pub operator but,
mindful of the benefts that an external viewpoint can
bring, the Board has commenced a search for a
Non-executive who could provide further insight and
a broader perspective on consumers in the wider
leisure sector.
I have concluded that each Director standing for election
or re-election at the forthcoming AGM is effective in their
role and provides a valuable contribution to the Board.
I therefore recommend each Director to you.
William Rucker
Chair of the Nomination Committee
Succession Planning
As announced in March, Ralph Findlay stepped down
from the Board and the Company at the end of this
fnancial year having been at the helm for 20 years.
In undertaking the search for a new CEO, we were
mindful of the immense challenge in replacing him
and enlisted the help of Russell Reynolds in identifying
and assessing suitable candidates for the role. I was
delighted that the outcome of this thorough and formal
process was to promote Andrew Andrea to the position,
with effect from the start of the new fnancial year on
3 October 2021. As a consequence of this appointment,
we then needed to recruit a new CFO. Having invested
time in understanding the needs and culture of the
business for the CEO role, the Board considered that it
would be most effcient to retain Russell Reynolds to assist
with the recruitment of a new CFO. I was also delighted
to announce that Hayleigh Lupino was appointed to the
role having previously been Director of Finance within
the Company. She is also appointed to the PLC Exec
along with Mags Dixon, who joined the Company
at the end of September as the new Commercial
Marketing Director.
Board diversity
We are a diverse Company committed to building an
inclusive culture where our people (and our guests) feel
welcome and included for who they are. The Board take
their responsibility in leading this commitment seriously
and apply the same approach to Board members as the
Company does with its employees. Further details are set
out on the following page and in our policy, which can
be found on our website www.marstonspubs.co.uk.
Recognising the value and richness of diverse experience
and backgrounds to the Company, the Committee
Diversity and Inclusion
At the heart of everything Marston’s stands for is our
people and, as a business, we want to celebrate,
include and work with individuals of all walks, traits
and backgrounds. We aim to ensure this commitment is
refected 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.
Our vision is to be an employer of choice, with a rich
and diverse mix of people who refect the societies and
communities within which we work and serve. Our policy
applies to our Board members, all of our employees,
our guests and our supply networks and 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.
Marston’s is a great place to work and we will continue
to build on that by not tolerating or condoning any kind
of inequality or unlawful discrimination. When issues
do arise, we will treat them sensitively and fairly.
Furthermore, we are committed to promoting a more
inclusive environment to attract and promote greater
diversity of talent and partnerships.
During this last year we have updated our policy and
set out our commitments. We have also been working
on further raising awareness of our confdential Speak
Up processes which are designed to promote honesty
and integrity by encouraging employees to raise any
concerns about potential wrongdoing in the business,
where they do not feel able to raise the matter with their
line manager.
Our next steps are to set out our action plans for
supporting and embedding diversity and inclusion within
the business. The intention was to have started this during
the last year but the impact of the pandemic, the closure
Our responsibilities
• To monitor the composition of the Board and its
Committees to ensure the right balance of skills,
experience and knowledge.
• To consider the succession plans for Directors
and senior management, taking into account the
leadership, skills, expertise and diversity needed
to meet the challenges and opportunities facing
the Company.
• To ensure the process for identifying and
recommending suitable candidates for Executive
and Non-executive Director positions delivers the
desired outcomes.
Attendees
Executive Directors, senior management and external
advisers may be invited to attend from time to time.
Key activities during the reporting year
• The recruitment of a new CEO and a new CFO.
• Considering this year’s board evaluation process.
• Assessing the make up of the Board and
succession planning.
• Reviewing the terms of reference and effectiveness of
this Committee.
• Reviewing the contribution and commitment of each
Director standing for election and re-election at the
2022 AGM.
54
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Corporate Governance Report continued
Nomination Committee Report
of all our pubs and the majority of our people furloughed,
meant that this was not possible. With the business now
fully open again, we have restarted work on actioning
the commitments that will make a real difference.
A copy of the policy can be found on our website,
www.marstonspubs.co.uk
Gender diversity reporting
Number of employees at 2 October 2021
Senior managers
(PLC Exec and Leadership Group)
16
21
Female
Male
6+ years
Female 7,068
Male
5,312
6+ years
Total employees
Election and re-elections
With the exception of Carolyn Bradley, who stepped
down from the Board at the end of July, and Hayleigh
Lupino, who was appointed to the Board for the frst
time with effect from 3 October 2021, all Directors will
offer themselves for re-election at the forthcoming AGM
on 25 January 2022. Details of each Director (serving
on the Board at the date of this report) are set out on
pages 48 to 49 and shall be set out to shareholders in
the Notice of Meeting. The Board is of the opinion, as
recommended by the Nomination Committee, that each
Director standing for election or re-election makes an
effective and valuable contribution to the Company
towards its long-term sustainable success.
55
Evaluation
Led by the Chair, an internal evaluation of the
effectiveness of the Board and its Committees was
undertaken this year. The responses to a questionnaire
were considered by the Chair and formed the basis for
one-to-one conversations; the NED also met without
the Chair being present to consider his performance
and effectiveness with the conclusions being fed back
through the Senior Independent Director. The Chair
then summarised the comments and discussions for
consideration by the Board. Agreed actions, together
with an update on progress since last year are
shown below.
The Chair concluded that the Board is satisfed with
its effectiveness and that of its Committees. The NEDs
continue to value the NED-only catch ups with the
Chair and have welcomed the resumption of meeting
with senior management and teams when they meet
in person.
2021 recommendations
• More regular follow-ups on strategic topics
• Greater insight into the guest focus from the newly
restructured commercial team
• A return to face-to-face meetings, re-instating pre-
Board dinners and increasing the time with the teams
• A focus on more detailed KPIs including
ESG measures
• Broadening the composition of the Board to support
the new CEO and CFO
Our 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.
Update on 2020
• Two online meetings will specifcally address
governance matters
• The Board have considered the re-positioned strategy
along with the Group’s vision, purpose and values
on a number of occasions and have also seen this
strategic focus articulated throughout the guest journey
plans, our people strategy and engagement plans.
• A Leadership Group has been formed, comprising the
direct reports of the PLC Exec, and every individual
has been involved, through cross-functional sessions,
in discussing the role of leadership behaviour in
raising performance and the development of our new
behavioural framework.
• Our engagement surveys resumed part way through
the year with the launch of our new dynamic platform
focused on facilitating more frequent but targeted
surveys and providing tailored support for line
managers in improving engagement and enablement.
The results will provide suffcient depth of data for line
managers to gauge how their people are feeling and
enable them to react accordingly.
• Alignment of the Directors’ Remuneration policy with
the new strategy. Performance measures for variable
incentives have changed to align with our revised
strategic priorities and our corporate and pub goals.
• All NEDs were appointed to serve on all Committees
with effect from 20 October 2020.
Appointing our new CEO and CFO
Following Ralph Findlay’s notice of intention to
step down as CEO, the Board appointed Russell
Reynolds to commence the search and assessment
of candidates for his successor. Russell Reynolds is
accredited under The Enhanced Code of Conduct
for Executive Search Firms as specifcally promoting
gender diversity in FTSE350 companies and is a
founding partner of the CBI’s Change in Race Ratio
initiative recognising their commitment to all aspects
of diversity.
The Board considered and prepared a brief
covering the key attributes, experience and
personal traits desirable in the ideal candidate,
then agreed a timetabled approach before the
commencement of a thorough and extensive
search. The Chair, the Chair of the Remuneration
Committee, Group HR Director and Group
Secretary met with Russell Reynolds to review the
long list of candidates, before arriving at a short list
for all of the NEDs to interview. In addition, it was
agreed that the shortlisted candidates would each
be subject to psychometric testing and an interview
with an organisational psychologist to provide
a fuller picture on the leadership behaviours of
each candidate.
The NEDs, together with the Chair, Group HR
Director and Group Secretary then met with each of
the shortlisted candidates in person. Having debated
the relative merits of each candidate and, with
reference back to the original brief, the Nomination
Committee, excluding Ralph Findlay, proposed
to offer the position to Andrew Andrea, noting
especially the value of his current and previous
experience. The Board unanimously approved
the proposal.
As a consequence of this decision, a process
then commenced to search for a new CFO.
It was agreed that appointing Russell Reynolds to
support the Board in this search also would be
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Corporate Governance Report continued
most effective, in view of the knowledge they had
acquired during the search process undertaken
for the CEO. It was further agreed that the process
would consider internal and external candidates as
before. A selection panel of the Chair of both the
Audit and Remuneration Committees, together with
the Group HR Director, Group Secretary and
newly appointed CEO, was appointed by the
Board to assess the candidates. A detailed brief
was drawn up, against which each candidate
could be assessed objectively. Having met
with each shortlisted candidate (who had each
undertaken the same psychological assessments
as for the CEO), Russell Reynolds recommended
that the panel meet frst with Hayleigh Lupino as
their preferred candidate. It was agreed that only
Matthew Roberts and Octavia Morley would
attend the meeting with Hayleigh, rather than
the entire selection panel, to avoid any potential
conficts of interest. Following this meeting,
both Matthew and Octavia recommended her
appointment to the Nomination Committee.
Noting that the appointment into her current role
as Director of Group Finance was with a view
to succession planning, and that she had shown
herself to possess the technical and commercial
attributes required for the role, the Committee noted
how favourably she benchmarked against the
external candidates identifed as suitable for the
role. The Nomination Committee were unanimous
in recommending her appointment as CFO and the
Board approved the proposal.
4. Audit, Risk and
Internal Control
Fair, balanced and understandable
Throughout the year, the Board receives updates on
the performance of the business and key challenges,
opportunities and risks. During the year-end processes,
comprehensive reviews and validations are undertaken
by the Company Secretariat and Finance teams with
support from teams across the business to ensure that
the information provided in the Annual Report and
Accounts, when taken as a whole, is fair, balanced and
understandable. Drafts of each section of the Annual
Report and Accounts are reviewed for consistency and
alignment across the whole document, and linkage to
strategy, business model and risks. The accuracy of the
content is then verifed by supporting evidence before
presenting to the Board, in good time for consideration
ahead of fnal approval. The external Auditor provides
reassurance through their review processes which are
focused on consistency between the narrative and
numbers, and an assessment of the appropriateness
of weighting to present a fair and balanced report on
the period.
Having reviewed the processes and heard from the
Audit Committee about the discussions with the external
Auditor, the Board is satisfed that the Annual Report and
Accounts taken as a whole presents a fair, balanced
and understandable representation of the Company’s
position and performance, together with its strategy
and business model.
Risks and internal controls
The Audit Committee receives regular and detailed
updates on the Company’s risks, both current and
emerging, and the risk management systems that are
in place to monitor and manage its risks. These are
presented by the Corporate Risk Director who attends
each meeting to provide the Non-executive Directors
with greater transparency of the risk management system
in their deliberations. The Board as a whole considers the
effectiveness of the risk management and internal control
systems through a thorough assessment of the risks
facing the Group that would threaten its business
model or future performance. To supplement these
considerations, the Board receives reports and updates
from the Risk & Compliance Committee along with
ongoing updates from the PLC Exec.
The Risk & Compliance Committee, chaired by the
Group Secretary, is responsible for monitoring all areas
of legal and regulatory compliance across the business
and for approving Group policies. Comprising relevant
representatives from across the business, the Committee
considers the impact of any emerging legislation on
the business, the effectiveness of our internal controls
and compliance processes as well as receiving regular
updates on those areas identifed as our key risks.
The quarterly meetings inform the Internal Audit plan and
provide an agreed focus for the compliance testing that
seeks reassurance that the business is complying with
relevant legislation, its policies and procedures.
More details on the Group’s approach to risk
management and internal controls are provided in the
Strategic Report on pages 22 to 31.
Going Concern and
Viability Statements
Once again, the pandemic has signifcantly impacted
the Group’s ability to trade and, throughout this year,
the Audit Committee has considered the Group’s
assessment of its going concern and viability, including
the assumptions and scenario testing applied to its
fnancial forecasts. These considerations have taken
account of advice and comment provided by the
external Auditor. During the year it has been necessary
to seek approval for further covenant waivers and
amendments from our bondholders and banks, directly
as a result of the closure of the business during the
national lockdown periods. Whilst we are optimistic
that further lockdowns will not be introduced, the future
remains uncertain because of the ongoing pandemic
risk and, as a result of the Group’s ability to continue as
a going concern being dependent on securing further
covenant waivers and amendments, this represents a
material uncertainty over going concern.
The Committee is comfortable with management’s
calculations and assumptions that its liquidity facilities
have suffcient headroom to weather further lockdowns
and so concurs with management that the Group will be
able to meet its liabilities as they fall due over the coming
period. The Going Concern and Viability Statements are
set out on pages 58 and 31 respectively.
56
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Audit Committee Report
Internal Audit function
During the year, the Internal Audit function was
reorganised into a more effcient structure to provide
assurance of the adequacy and effectiveness of internal
controls, risk management and compliance across
the Group.
The Committee have reviewed and agreed the Internal
Audit Plan for 2021/2022 having regard to the
Group’s business risks and the disruption to operations.
The Plan is suffciently dynamic to be able to respond
to new information and unforeseen events should the
need arise and has been drawn up in the light of the
continuing uncertainty of the impact of COVID-19.
During lockdown, essential compliance checking
continued remotely but other planned audits were
suspended. As the business reopened the internal
audit team and co-source recommenced their work,
focusing on the delivery of targeted audits, mindful of the
pressures that the closure and reopening has placed on
the business whilst seeking the necessary assurances as
to the robustness of the particular area. The internal audit
team briefs the Committee regularly on its fndings from
audit assignments along with any recommended actions
arising and a timetable for completion.
Dear Shareholder,
I am pleased to present the Audit Committee Report for
the period ended 2 October 2021.
The Committee has continued to play a crucial role in
assessing the integrity of the Group’s processes and
procedures responsible for its fnancial reporting, internal
control and risk management. Once again, the business
was impacted by COVID-19 and I have maintained
regular conversations with both CFOs and the external
Auditor around the Group’s fnancial position and any
required courses of action. The disruption has illustrated
how we need to embed the future threat of such risk into
all of our principal risks but I am reassured by the Group’s
effective response to the impact of the pandemic.
During the year, the Committee considered the results
of the external valuation conducted by independent
chartered surveyors, noting the impact of the pandemic
on pub values, along with an assessment of the Group
and Company’s ability to continue as a going concern.
I am satisfed that both matters have been the focus of a
thorough process and interrogation before concluding on
the outcomes. Additionally, the Committee has continued
to have oversight of all matters impacting business conduct
and integrity, whistleblowing allegations and the principal
risks and emerging risks.
In addition to the Committee receiving regular updates
from the external Auditor, the CFO and Corporate Risk
Director, as Chair I have continued to conduct individual
meetings with each of them to maintain an independent
perspective and I am confdent that each continues to
display the necessary level of capability and assurance
for their respective responsibilities.
Following this year’s internal evaluation, I am pleased to
confrm that I consider the Committee’s effectiveness to
have been of a high standard, providing the appropriate
level of independent scrutiny and oversight, supported
by the assurance from the internal and external auditors.
External Audit
The Group’s relationship with the external Auditor is
managed through their attendance at each Committee
meeting together with several meetings with the Chair
of the Committee, providing suffcient opportunity to
interrogate and challenge key areas and fndings.
A paper setting out a formal evaluation of the
effectiveness of this year’s audit will be drafted to the
March 2022 Board.
KPMG were appointed in 2020 following an
objective and competitive tender process overseen by
the Committee. There are no contractual obligations
restricting the Group’s choice of external auditor.
During the year the Committee considered the
independence and objectivity of the external Auditor,
which was confrmed by an independence letter from
KPMG setting out their safeguarding procedures
alongside regulatory requirements and their professional
and ethical standards. The effectiveness, effciency and
cost of the external audit process was considered as
part of the review of the 2020 fnal audit, comprising
communication expectations, timing of deliverables,
interim procedures, review processes and the quality
of reporting observations and recommendations.
Meetings between management and the external
Auditor took place after the year-end audit, the frst
undertaken by KPMG, with a view to further improving
the planning process to ensure a smooth audit of the
2021 year end and to explore how regular meetings
with Internal Audit might assist that aim. Taking account of
all these factors, the Committee consider KPMG to have
been effective in delivering a high-quality audit with
the appropriate level of independence and objectivity,
and therefore recommend their re-appointment
to shareholders.
No non-audit services were provided this year, apart
from advice on our drafting of the responses to the
FRC letter.
Matthew Roberts
Chair
Our responsibilities
• Reviewing the integrity of the Annual Report and
Accounts and Interim Results and advising the Board
on their assessment and approval, paying particular
attention to signifcant reporting judgements.
• Monitoring the internal controls and risk management
system, with particular regard to the fnancial controls
and approving the Viability Statement.
• Review and approve the annual internal audit plan,
receiving regular updates on work done.
• Reviewing the external Auditor’s independence,
objectivity and effectiveness.
Attendees
The Corporate Risk Director and the external Auditor
attend each meeting. The CEO and CFO are usually
invited to attend all or part of the Committee’s meetings.
Key activities during the reporting year
• Reviewing the Interim Results and full year accounts
prior to Board approval.
• Considering the most signifcant areas of fnancial
judgement and related accounting treatment.
• Reviewing the main corporate risks, methods of
managing, mitigating and assurance testing.
• Assessing the effectiveness of the ‘Speak Up’ policy
and developments in allergen reporting and training.
• Receiving updates on and approving the Statutory
Pubs Code compliance report.
57
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Audit Committee Report continued
The Committee has noted that, even in a downside
scenario, the Group has suffcient liquidity to prepare
the accounts on a going concern basis. Based on both
the base case forecast for next year and the severe but
plausible downside scenario of a two-month lockdown
with no Government support, the Group will require
banking waiver consents after January 2022 and also
bondholder waivers for the securitisation in the downside
scenario. The Committee has noted that management
are actively engaged with the Group’s lenders to keep
them informed of trading performance and the need to
negotiate further waivers. Whilst there is no certainty that
the waivers will be granted, the Committee is supportive
of management’s assertions that, based on the support
received during 2020 and 2021, such waivers will
be secured.
Estate valuation
The Committee met on several occasions to consider
the valuation of the estate, noting that the external
valuation undertaken this year has resulted in a freehold
impairment of £102m and a leasehold impairment of
£27m. The Committee heard from the Property Director,
who explained the methodology and assumptions
behind the valuation, together with the key issues arising
and the road to recovering the value. The Committee
supports the move to more frequent valuations in
the future to capture this recovery. Both the external
Auditor and the Chair of the Audit Committee met with
the external valuers to consider and challenge their
approach and conclusions. The Committee noted the
work undertaken by the external Auditor, in reviewing
the valuation and have concluded that the assumptions
around fair maintainable trade and valuation multiples
refect the current ongoing uncertainties. They therefore
accept that the valuation is reasonable overall.
Valuation of derivative fnancial instruments
Recognising that the valuation of interest rate swaps is
sensitive to the discount rate and credit risk adjustment,
the Committee noted the assumptions and methodology
applied. In particular, the Committee considered the
credit risk adjustment applied by management, noting it
to be in line with the range expected by the external
Auditor and comparable to other companies with similar
credit risks. The Committee further noted the inputs used
to derive future rates of interest and the timing of cash
fows and found these to be reasonable. The Committee
is also satisfed with the disclosure of all swaps as
non-current liabilities within the Balance Sheet and
supports the replacement of LIBOR with SONIA (Sterling
overnight index average) as the alternative interest rate
where relevant.
Accounting for the disposal of
Marston’s Beer Company
The disposal of the brewing business and subsequent
acquisition of 40% of CMBC, along with an ongoing
exclusive drinks supply agreement, was a major
transaction occurring during the year that incorporates
a number of different accounting treatments.
The Committee noted the fair value accounting for the
cash receipt, the cost of the investment in CMBC and
the contingent consideration and is comfortable with
management’s approach. The Committee observed
the work undertaken by the external Auditor to assess
the ongoing relationship with CMBC and noted it to
be at arm’s length, thereby supporting the accounting
treatment of the various assets together with the
disclosure in the fnancial statements, at notes 8 and 12
on pages 104 and 110.
FRC letter
During the period, the Company received a letter
from the FRC following a review of its Annual Report
and Accounts for the period to 3 October 2020
requesting clarifcation of several key judgement
areas. The enquiry was concluded ahead of the year
end. No specifc requests to change the accounting
treatment were made and, having refected on the
questions raised, management have undertaken to
increase certain disclosures in these fnancial statements
where relevant to aid the reader’s understanding.
Specifcally, these comprise: more detailed information
about debt covenants; classifcation of the fair value
measurement of the pub estate as Level 3 of the fair
value hierarchy, rather than Level 2; an explanation
of any signifcant movements in the discount rate used
in an impairment review; the assumptions relating to
impairments; the residual value of the effective freehold
land and buildings pub properties being equal to the
carrying value; the cash fow statement to commence
with an IFRS measure of proft or loss; and the nature
of evidence supporting the recognition of deferred
tax assets.
The FRC make it clear that their review provides no
assurance that the Annual Report and Accounts are
correct in all material respects nor do they verify the
information provided by the Company and therefore
they accept no liability for reliance on them by the
Company or any third party, including but not limited
to investors and shareholders.
Statutory Pubs Code
The Committee has been updated during the year on
matters relating to the Pubs Code and, in accordance
with those regulations, the Chair of the Audit Committee
has approved the annual compliance report that was
submitted to the Pubs Code Adjudicator (PCA) by the
Company’s Code Compliance Offcer for the reporting
period 1 April 2020 – 31 March 2021.
During the reporting period, Marston’s was not subject
to any investigations, enforcements or representations
of unfair business practices by the PCA. Two referrals
were made to the PCA: one was in relation to the MRO
provisions of the Pubs Code, and one was on non-MRO
grounds. Both referrals were subsequently withdrawn.
The Group continues its commitment to work within the
Pubs Code regulations and regularly reviews its internal
processes to ensure all relevant internal and external
parties are aware of the latest regulations and practices.
During the reporting period, all of Marston’s Business
Development Managers received updates and training
on the Pubs Code.
Signifcant fnancial judgements
and estimates
Going Concern
The Committee has continued to monitor and review
management’s assessment of the potential impact of any
additional COVID-19 related restrictions, specifcally with
regard to the Group’s ability to operate as a going
concern for the next twelve months and meet its liabilities
as they fall due over the next three years. It has considered
the methodology of management’s projections and
forecasts, noting that they take account of a severe but
plausible downside scenario relating to the pandemic,
the consequential impact on liquidity and trade, the
changes in consumer behaviour and economic and
political uncertainties.
58
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Directors’ Remuneration Report
Annual Statement
£97m lower than at the same point in 2020, following
completion of the partnership with Carlsberg in October
2020. We also recognise and acknowledge that
Government support, in the form of the Coronavirus
Job Retention Scheme (CJRS) and business rates relief,
has contributed to this result.
We launched our revised strategy during the 2019/20
fnancial period and, since then, have embedded our
strategic objectives across the organisation. Our strategy
and the pages that follow (10 to 16) provide more detail
on how we are working towards our vision of ‘Pubs to
be proud of’.
Our people are engaged, energised and committed
to delivering our goals and seeing Marston’s return
to growth. The purpose of our people strategy
(on page 34) is to support the delivery of our pub
and corporate goals and we will continue to review
workforce related remuneration and polices, together
with our Directors’ Remuneration Policy, to ensure they
remain aligned and ft for purpose. Ahead of our tri-
annual renewal of our Directors’ Remuneration Policy at
our 2023 AGM, our primary focus will be continuing to
invest in our teams and our pubs and ensuring that our
Remuneration Policy continues to be ft for purpose for
a focused pub company.
Directors’ Remuneration Policy
Our current Remuneration Policy became effective
from the close of the 2020 AGM on 27 January 2020
and the following pages describe how the policy has
been applied in 2020/21. 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 Corporate
section of our website (www.marstonspubs.co.uk).
Review of the year
Performance
Both the Chair’s Statement and CEO’s Statement report
on our performance in 2020/21 and how further pub
closures and signifcant trading restrictions, as a result of
COVID-19, have continued to impact the business and
our fnancial results. The underlying loss before tax was
£100.0 million (2020: £22.0 million).
Performance outcomes for the year
Salary and fees 2020/21
During the reporting period, the Group experienced
further disruptions to trading under the tier system,
a subsequent full lockdown and ongoing trading
restrictions during the Spring and Summer. Whilst the
majority of our workforce was furloughed for long
periods during the year, under the Government’s CJRS,
a number of employees, including the CEO, CFO and
Non-executive Directors, continued to work during
these periods. As a result of strong cash controls,
implemented during 2019/20, suffcient cash headroom
in our banking facilities and receipt of the proceeds from
the completion of the partnership with Carlsberg early in
the 2020/21 reporting period, all working employees
received their full salary during the period. For those
employees who were furloughed, the business ‘topped
up’ furlough payments to 100% of salary, up until
January 2021. The majority of our employees returned to
work during the period from April to June, with less than
1% of the workforce furloughed at the end of June 2021.
Annual bonus 2020/21
With the underlying loss before tax of £100.0 million
and free cash fow (FCF) for the period of £(61.0)
million, the threshold for both of the key fnancial
metrics in the annual bonus scheme were not met.
The third fnancial metric and the We will Grow
strategic measures did reach the target performance
level, resulting in a formulaic outturn of bonuses for
the Executive Directors of 24.4% of salary. However,
recognising the support received from Government
and in the context of the wider shareholder experience,
management proposed that no bonus should be paid
to the Executive Directors, senior management team
or to participants in the wider Group bonus scheme.
The Committee is disappointed not to be able to reward
management and the wider workforce in respect of
the progress made towards these strategic objectives,
particularly under such challenging trading conditions,
but supported the recommendation. Further information is
given on page 65.
When pubs reopened, a new ‘Boost’ bonus scheme
was implemented for operational and local pub teams,
with performance measures focused on standards
and Guest satisfaction scores. A small number of
employees received a payment under this scheme, in
respect of performance during the last quarter of the
reporting period.
LTIP 2018/19 Outturn
The three-year performance period for the LTIP award
made in December 2018 ended on 2 October 2021.
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.
LTIP 2019/20
The 2019/20 LTIP award was granted in December
2019, prior to the disposal of Marston’s Beer Company
into the partnership with Carlsberg. The applicable
performance targets have been adjusted to take account
of the disposal, and further information is provided on
page 66. The Committee is satisfed that this adjustment
maintains the level of stretch in the original targets.
Single total fgure of remuneration
Taking into account the continued disruption caused
by the global pandemic, pub closures and signifcant
trading restrictions during the reporting period, and
the signifcant negative impact on delivery of the
Group’s key performance indicators, the creation of
Dear Shareholder,
I am pleased to present our report for the period
ended 2 October 2021. Whilst the disruption to our
business caused by the global pandemic has continued
during the year, we have worked on ensuring our
remuneration structures are aligned to our strategic
objectives and provide the right level of incentivisation
to management and the wider workforce. Our aim is to
always consider the wider workforce, our shareholders
and other stakeholders by taking a fair, prudent and
balanced approach to remuneration. We are grateful
for the continued support of our shareholders despite
the suspension of the dividend programme, as a
consequence of the impact of the pandemic.
The Annual Report on Remuneration (on pages 64 to
72) describes how the Directors’ Remuneration Policy
has been applied for the period ended 2 October
2021, and how we intend to implement the Directors’
Remuneration Policy for the 2021/22 fnancial period.
Strategic and business context
In the reporting period, we have experienced further
pub closures and signifcant trading restrictions that
have impacted on our earnings. At the time of writing,
COVID-19 case numbers in the UK remain high amid
speculation of certain restrictions returning during the
Winter months. The business has remained focused
on cash management during the year, but we have
also invested in our estate ready for reopening and a
return to growth. Our net debt borrowings (excluding
IFRS 16 commitments) at £1,232m at the year end was
59
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Directors’ Remuneration Report continued
Annual Statement
As announced on 11 March 2021, and confrmed on
16 September 2021, Ralph Findlay stepped down from
the Board on 2 October 2021 and retired from his
role as CEO. Details of the remuneration arrangements
connected with his retirement are set out on page 68.
Alignment of the Directors’
Remuneration Policy with the Code
When determining the application of the Directors’
Remuneration Policy, the Committee considered
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 shareholding requirements for the Executive Directors
and the operation of a post-employment shareholding
guideline further align the interests of our Executive
Directors with 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, refect our values and
support our Group purpose and strategy.
Key activities of the Committee in
respect of the year
• Review of progress towards implementation of the
Group Reward Plan – building reward structures
that are relevant, engaging and sustainable for all
our people.
• Remuneration packages for new appointments
to the CEO and CFO roles, including
pension arrangements.
• Agreeing and approving remuneration in connection
with Ralph Findlay’s retirement from the Board and
as CEO.
• Consideration of pay review proposals for the Chair,
senior management and the wider workforce.
• Continued to monitor the impact of COVID-19
pandemic on employees: wellbeing, reward and
motivation as the business reopened.
• 2021 bonus and 2018/19 LTIP award outturns,
as outlined above.
• Consideration of targets for Operational, Group,
senior management and Executive Director
bonus schemes.
• Consideration of LTIP grants.
• Review of ‘in-fight’ LTIP awards and adjustment of
EPS target for 2019/20 award.
• Review of Executive Directors’ and senior
management shareholdings in the Company, in the
context of shareholding guidelines.
• CEO pay ratio reporting.
Looking forward to 2021/22
Executive Director pay and the
wider workforce
Salary, benefts and performance related rewards
provided to employees are taken into account when
setting policy for Executive Directors’ remuneration.
We aim to operate with fairness, integrity and
transparency across the organisation and we have
employee feedback systems and employee forums
in place, via which the wider workforce’s views
on remuneration are fed back to the Committee.
Further information is detailed in our Corporate
Governance Report on page 50.
The majority of our workforce have their remuneration
set by statute. However, general managers, at a
local level, do have discretion to apply a higher rate
where appropriate and to retain those differentials
where minimum levels are increased. We previously
announced that we are no longer a zero hours
employer, with team members able to opt for a fxed
hours contract. Annual reviews for our salaried workforce
(comprising our Pub Support Centre and pub general
managers) were aligned to October during 2019/20.
The decision on any increase is made by the PLC
Executive during September, ahead of the October
Remuneration Committee meeting, allowing a paper to
be submitted that summarises the outcome of the review.
This paper is taken into account when setting Executive
Directors’ and senior management remuneration (also
effective from the start of October for the following
12 months). The Committee also has oversight of how
bonus schemes throughout the organisation align,
the performance measures and targets and outturn of
each scheme, providing context for the approval of any
pay-out to Executive Directors and senior management.
shareholder value and the wider stakeholder experience
the Committee considers that the single total fgure of
remuneration is appropriate. The Executive Directors
received no variable pay for the period. Employee pay
has been protected as far as possible during the period:
with a 2% increase implemented in October 2020;
and, as noted above, pay for furloughed employees
was topped up to 100% up until January 2021 with the
majority of the workforce returning to work between
March and June 2021.
Change in Executive Directors
I was delighted with the outcome of the recruitment
process for both the CEO and CFO roles and look
forward to working with both Andrew and Hayleigh
as they lead Marston’s into the next phase of its
history, as a focused pub operator. Ahead of the
decision to offer each post to the successful candidate,
the Remuneration Committee discussed the proposed
remuneration package, with input from our Group HR
Director, Russell Reynolds, the executive search frm
appointed by the Board, our remuneration advisers
and the Chair. The packages agreed for both Andrew
and Hayleigh are in accordance with our Directors’
Remuneration Policy and provide incentives that are
aligned to our strategy and commensurate with their
roles, responsibilities and experience.
In summary, the base salary for Andrew has been set at
£602,550 (i.e. slightly lower than the base salary that
would have applied to Ralph Findlay with effect from
1 October 2021). Hayleigh’s base salary has been
set at £386,250 (which is lower than Andrew’s base
salary as Chief Financial and Corporate Development
Offcer). As detailed below, the pension/cash in lieu of
pension rate for both Andrew and Hayleigh has been
set at 3% of base salary with effect from 3 October
2021, in line with the rate available to the majority of
the wider workforce. Overall, this means that the fxed
pay for both Andrew and Hayleigh is below that of their
predecessors and no changes have been made to the
overall annual and long term incentive opportunities.
60
Marston’s PLC Annual Report and Accounts 2021
The Directors consider that the annual bonus targets
for 2021/22 fnancial year are commercially sensitive
matters as they provide competitors with insight into
our business plans and expectations, and therefore
they should remain confdential 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.
The strategic measures within the bonus scheme have
been revised to align with key measures that the business
is focused on. (Details of our updated KPIs are set out
on page 17). The frst strategic objective will focus on our
sales performance against the Peach tracker; we want
to consistently outperform the market in both our food
and wet sales (10% of maximum). The second strategic
objective will focus on our guest satisfaction scores
which are a key strategic focus for the business (10% of
maximum). More information about Reputation can be
found on page 11. The third strategic objective
is employee engagement (10% of maximum); we
want to be a great place to work where our people
feel valued and can grow to be the best they can be.
Happy and engaged teams will take pride in ensuring
our guests have a great experience. The fnancial and
strategic measures are aligned with those applied to
our senior management, group and operational bonus
schemes, as appropriate to each of those schemes.
Strategic pillar
We will Grow
We are Guest Obsessed
We Raise the Bar
Performance measure
% weighting for 2021/22
EBITDA (financial)
Free cash flow (financial)
Performance v Peach (strategic)
Guest – Reputation.com (strategic)
Employee Engagement (strategic)
30%
40%
10%
10%
10%
Strategic Report
Governance
Financial Statements
Additional Information
Directors’ Remuneration Report continued
Annual Statement
Pay award effective 1 October 2021
A 3% increase for senior management and the
wider workforce has been approved with effect from
1 October 2021. This recognises the challenging
period ahead, the commitment of our workforce and
the aim to return Marston’s to growth. As noted above,
with Andrew Andrea appointed as Chief Executive
Offcer and Hayleigh Lupino appointed as Chief
Financial Offcer, both with effect from 3 October 2021,
their salaries were set upon appointment to refect their
individual roles, responsibilities and relevant experience.
Following the deferral of the fees review for
Non-executive Directors and the Chair, the Committee
approved a 3% increase to the Chair’s fees. The Chair’s
fees have not changed since his appointment in 2018
and the increase is in line with that applied to the
wider workforce. Separately, the Chair and Executive
Directors approved an increase to Non-executive fees,
which were last reviewed and increased in October
2018. The increase to the base fee is in line with the rate
applied to the wider workforce.
Retirement benefts
The Committee had previously set out its intention to
reduce pension contributions/cash in lieu of pension
contributions for incumbent Directors to 7%, being
the contribution rate available to the majority of
employees who participate in the Group Personal
Pension Plan (GPPP), not later than the 2023/24
fnancial period. The Committee refected on investor
feedback and how the shape of the workforce had
changed now that Marston’s was a pure pub operator,
following completion of the partnership with Carlsberg.
Being mindful that the pension scheme available to
the majority of the wider workforce is NEST, with a
contribution rate set at 3%, the Committee considered
and agreed that 3% was a more appropriate rate with
which to align Director contribution rates. Accordingly,
with effect from 3 October 2021, the employer pension
contribution rate for both the CEO and CFO has been
set at 3% of salary.
Annual bonus for 2021/22
During the implementation of the Group Reward Plan,
the Reward team have reviewed bonus arrangements
across the Group and, with the revised strategy and
a simpler people structure in place, have taken the
opportunity to simplify the schemes for the wider
workforce and ensure that all performance measures
are aligned with strategy and appropriate for each
scheme. Targets and performance measures vary slightly,
based on the focus for each level, for example targets
for operational and local pub teams are linked to
segmental or local performance. The maximum potential
award, expressed as a percentage of salary, also varies
between different employee groups.
For the 2021/22 annual bonus scheme, no changes
in quantum are proposed in respect of the Executive
Directors, which will remain at 100% of salary. Despite the
continuing uncertainty surrounding the ongoing impact
of COVID-19 current trading conditions, the current pay-
out at threshold of 20% will be retained and on-target
performance will return to the normal 50% pay-out level.
Alongside the change in the performance measures
for the Long Term Incentive Plan discussed below,
the Committee has decided to replace underlying PBT
with EBITDA. EBITDA is a key measure that is reported
internally and provides ‘line of sight’ for all bonus scheme
participants. This also mitigates the risk of using the same
performance measure in both the Annual Bonus and
the LTIP. The table below shows that the weighting of
the fnancial measures, EBITDA and FCF, have been
slightly adjusted from 25% to 30% of maximum and from
30% to 40% of maximum, respectively. The Committee
has agreed to increase the weighting for EBITDA as
the Group pursues a return to growth and are satisfed
that a higher weighting for FCF than EBITDA remains
appropriate on the basis we are focused on the cash
generated by our pubs, after paying interest and other
borrowing costs, that is available for re-investment,
reducing debt or paying dividends.
61
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Directors’ Remuneration Report continued
Annual Statement
LTIP for 2021/22
Market conditions remain challenging, with continued
uncertainty around the pandemic, global supply chain
issues, competitive market for talent and infationary
pressures. Against this backdrop, as a pure pub
operator, with a new strategy in place and clear
strategic objectives and goals, the Committee intends
to grant awards under the Long Term Incentive Plan in
December, in line with the normal award cycle.
Recognising the importance of the Leadership Group
and their contribution to the ‘Back to a billion’ plan,
participation in the 2021/22 LTIP is being extended to
include all members of the Leadership Group. This will
ensure that we maintain a fair and consistent approach
from the Executive team through to the Leadership
Group; it is aligned to our strategic deliverables and
is the most appropriate performance lever in the
current circumstances.
The Committee has reviewed the LTIP performance
measures and has decided to replace underlying EPS
with underlying PBT for the 2021/22 LTIP. A pre-tax
measure is considered to be a more appropriate
measure of proftability for Marston’s as this mitigates
the risk of EPS volatility caused by tax losses to be
carried forward in future fnancial periods. This is also
considered to be a more relevant metric taking into
account the extended participation in the LTIP, given the
better line of sight for participants.
Weightings will not be affected by the change from
EPS to PBT (40% PBT, 40% NCF and 20% relative TSR).
Full details of performance targets and Executive Director
award levels are set out on page 64.
Committee focus for 2021/22
The Directors’ Remuneration Policy is next due to be
considered by shareholders in 2023. The Committee
will undertake a thorough review of the current policy,
and consider what changes are required to ensure the
policy is ft for purpose for a focused pub company,
with appropriate structures and performance measures
for our variable pay schemes, in the context of the wider
workforce and aligned with the interests of shareholders
and other stakeholders in our business. We will also
continue to monitor the operation of the policy in its fnal
year, particularly in the context of the continuing global
pandemic and other market challenges. The Group
and the Committee remain committed to a fair and
responsible approach to executive pay.
Shareholder engagement
The Committee welcomes ongoing shareholder
dialogue and takes an active interest in voting outcomes.
We are pleased that the 2020 Annual Report on
Remuneration received strong levels of support, with over
86% 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. 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 noted
above, the pension/cash in lieu of pension rate for both
our new CEO and CFO has been set at 3% of base
salary with effect from 3 October 2021, in line with the
rate available to the majority of the wider workforce.
As part of the policy review during 2021/22, we will
continue to engage with shareholders.
62
We welcome and encourage all feedback from
our shareholders as it helps inform our thinking
on remuneration matters 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. At the time of
writing, we are intending to hold a physical AGM
in 2022, with shareholders invited to attend. I will be
available at the AGM (on 25 January 2022) to answer
your questions. Alternatively, if you are not able to attend
or, if any prevailing restrictions at the time prevent the
AGM from being held as a physical meeting, please do
send your questions to the email address above.
Octavia Morley
Chair of the Remuneration Committee
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 Chair’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 beneft 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 until 2 October 2021, attended the
majority of meetings during the year to provide advice
in respect of the remuneration of Andrew Andrea (CFO
during the reporting period) and senior management.
Ralph did not attend either of the additional meetings that
discussed the remuneration packages for the incoming
CEO and CFO. 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 £9,200 during the year in respect
of advice given to the Committee, and also provided
advice during the year in relation to the operation of
the Company’s share plans.
Details of the Committee’s membership are set out on page 49, along with the membership of other
Board Committees.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Remuneration Summary 2020/21
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
Outcomes
interests are aligned with shareholders.
• Ensure Director and senior management salaries are set with reference to the wider workforce.
Component
Key features (current Policy)
Implementation in 2020/21
Andrew Andrea
Ralph Findlay
Basic salary and
core benefits
Refects scope of the role; to recruit and
retain calibre required; and reviewed in
context of wider Group
Annual bonus
Maximum 100% of salary
Committee discretion
Clawback provisions apply for up
to two years
2% increase in salary in 2020/21 in line with the
average salary increases across the Group
2% reduction in pension contributions for CEO
and CFO from 20% to 18%
Other elements of benefts package unchanged
0% bonus awarded refecting performance
against targets as described on page 65
Deferred element
of bonus
Payments in excess of 40% of maximum
usually deferred into shares
No bonus awarded so no deferral into shares
Malus provisions apply for up to
three years
Long Term Incentive
Plan (LTIP)
Maximum annual award is 150%
of salary
LTIP award granted in December 2018 lapsed in
full as performance targets not met
Normal maximum is 125% of salary
Malus and clawback provisions apply
for up to two years
Awards of 125% of salary granted during the
period in May 2021
Share ownership policy 200% of salary for all Executive Directors 313% of salary for Ralph Findlay, CEO
120% of salary for Andrew Andrea, CFO
63
i
Fixed
l
Bas c sa ary, core
benefits and
i
pens on
£478,374
£445,365
£711,612
£592,423
Variable
l
Annua bonus
Long-term
i
incent ves
Total
£0
£0
£0
£0
£0 £478,374
£0 £445,365
£0
£711,612
£0 £592,423
2021
2020
2021
2020
How we performed against our objectives
Annual bonus for 2020/21
Performance metric
Underlying Group
profit before taxation
Free cash flow
Successful
implementation of the
transition period for the
Carlsberg partnership
Guest satisfaction
scores
Cost reduction
programme
Bonus outturn
Bonus awarded
Link to strategy
Weighting
Threshold
Target
Maximum
Actual
% of salary
We will Grow
We are Guest
Obsessed
We Raise the Bar
25% £33.41m
£53.5m
30%
85%
25%
£34.1m £37.64m £(100.0)m
£54.6m £60.28m £(61.1)m
90%
100%
90%
0%
0%
15%
10%
78%
80%
84%
77.8%
0%
10%
£2.5m
£3.0m
£4.0m
£3.9m
9.4%
24.4%
0%
LTIP vesting in 2020/21 (2018/19 LTIP Award)
Performance metric
CROCCE
Link to strategy
See note below1
Weighting
40%
Base
10.5%
Free cash flow
Relative TSR
We will Grow
40% £300m
20%
–
1. At the time of the award, CROCCE was a key performance indicator.
Threshold
Base
+0.25%
Base
+7.5%
Median
On-target
50% vesting
Base
+0.5%
Base
+15.0%
–
Maximum
100% vesting
Base
+1.0%
Base
+30.0%
Upper
quintile
Actual
2.7%
LTIP vesting
0%
£126.6m
Below
median
0%
0%
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
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 2 October 2021. Sections in the report not specifcally stated as audited are not subject
to audit.
Executive Directors
Single total fgure of remuneration (audited)
Period ended 2 October 2021
Andrew Andrea
Ralph Findlay
Period ended 3 October 2020
Andrew Andrea
Ralph Findlay
Salary
£
Benefits
£
Bonus
£
Long-term
incentives
£
Pension
£
Total fixed
remuneration
£
Total variable
remuneration
£
Total
£
392,928
586,682
14,719
19,327
0
0
0
0 105,603
70,727 478,374 478,374
711,612
711,612
0
0
Salary1
£
Benefits
£
Bonus
£
Long-term
incentives
£
Pension
£
Total fixed
remuneration
£
Total variable
remuneration
£
Total
£
359,542
466,785
13,915
18,271
0
0
0
71,908 445,365 445,365
0 107,367 592,423 592,423
0
0
1. In the first national lockdown in March 2020, during the 2019/20 financial period, 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.
Individual elements of remuneration (audited)
Fixed elements: Base salary, benefts and retirement benefts
Directors’ Remuneration Policy
Base salary is a core element of fxed remuneration, refecting the individual’s role and experience. Base salary
is usually reviewed annually by the Committee and fxed for the fnancial year. Salary increases are reviewed in
the context of salary increases across the wider Group.
Executive Directors receive benefts 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 defned contribution pension scheme and, if a member
before closure of the scheme, the defned beneft scheme. In appropriate circumstances, Executive Directors
may take a salary supplement instead of contributions into a pension plan.
Base salary
A 3% increase for senior management and the salaried workforce1 has been approved with effect from 1 October
2021. This recognises the challenging period ahead, the commitment of our workforce and the aim to return Marston’s
to growth. Basic salaries for 2021/22, for the Executive Directors, were set upon appointment and are detailed in the
table below. The increase in Andrew Andrea’s salary refects his change of role from Chief Financial and Corporate
Development Offcer to Chief Executive Offcer, with effect from 3 October 2021, with his new salary being slightly
lower than the base salary that would have applied to Ralph Findlay with effect from 1 October 2021.
Name
Andrew Andrea
Hayleigh Lupino
Ralph Findlay
Base salary
2020/21
£
392,927
N/A
586,682
Base salary
2021/22
£
602,550
386,250
N/A
1. The majority of the wider workforce (pub-based employees) have their remuneration set by statute rather than the market.
Benefts
Private medical insurance benefts are unchanged but premiums may vary from year to year.
Retirement benefts
The pension fgures shown in the single fgure table above represent the cash value of pension contributions received
by the Executive Directors. This includes any salary supplement in lieu of a Company pension contribution.
Pension entitlements
The Committee had previously set out its intention to reduce pension contributions/cash in lieu of pension
contributions for incumbent Directors to 7%, being the contribution rate available to the majority of employees who
participate in the Group Personal Pension Plan (GPPP), not later than the 2023/24 fnancial period.
The Committee refected on investor feedback and how the shape of the workforce had changed now that Marston’s
is a pure pub operator, following completion of the partnership with Carlsberg. Being mindful that the pension scheme
available to the majority of the wider workforce is NEST, with a contribution rate set at 3%, the Committee considered
and agreed that 3% was a more appropriate rate with which to align Director contribution rates. Accordingly, with
effect from 3 October 2021, the employer pension contribution rate for both the CEO and CFO has been set at 3%
of salary.
64
Marston’s PLC Annual Report and Accounts 2021
2020/21 outturn
Bonuses to Executive Directors, for the period under review, are based on performance against pre-set targets for
a combination of fnancial and strategic targets, with fnancial targets making up 65% of the maximum award.
As disclosed last year, the Committee reviewed the structure of the annual bonus scheme and, to refect the
uncertainty surrounding the impact of COVID-19 on trading conditions at the time, the current pay-out at threshold
of 20% would be retained but on-target performance would result in a 40% pay-out, instead of the normal
50% pay-out.
The targets and actual performance for 2020/21 are set out below.
With the underlying loss before tax of £100.0 million and free cash fow (FCF) for the period of £(61.0) million, the
threshold for both of the key fnancial metrics in the annual bonus scheme were not met. The third fnancial metric and
the We will Grow strategic measures did reach the target performance level, resulting in a formulaic outturn of 24.4%.
However, recognising the support received from Government, the impact on employees during the period, and in the
context of the wider shareholder experience, management proposed that no bonus should be paid to the Executive
Directors, senior management team or to participants in the wider Group bonus scheme.
Performance metric
Weighting
Threshold
Target
Maximum
Actual
% of salary
Underlying Group profit before taxation
Free cash flow
Successful implementation of the transition
period for the Carlsberg partnership
Guest satisfaction scores
Cost reduction programme
Bonus outturn
Bonus awarded
25% £33.41m
£53.5m
30%
85%
25%
£34.1m £37.64m £(100.0)m
£54.6m £60.28m £(61.1)m
90%
100%
90%
10%
10%
78%
£2.5m
80%
£3.0m
84%
£4.0m
77.8%
£3.9m
0%
0%
15%
0%
9.4%
24.4%
0%
Strategic Report
Governance
Financial Statements
Additional Information
Annual Report on Remuneration continued
For the 2020/21 fnancial period:
• No contributions were made into the GPPP or the defned contribution scheme, on behalf of Andrew Andrea
during the year. For the period ended 2 October 2021, Andrew Andrea received a cash supplement of 18% in
lieu of pension contributions.
• Ralph Findlay was previously a member of the defned beneft scheme and has opted to no longer accrue future
benefts. For the period ended 2 October 2021, Ralph Findlay received a cash supplement of 18% as a salary
supplement in lieu of pension contributions.
• Ralph Findlay accrued benefts in the defned beneft scheme which closed to future accrual in 2014. He elected
to draw his defned beneft pension before his normal retirement age, with effect from 9 April 2020. Details are
shown in the table below:
Ralph Findlay
Pension in
payment at
02.10.21
£
84,413
Pension in
payment at
03.10.20
£
83,624
Normal
retirement
age
60
During the year, Ralph Findlay’s pension in payment increased by £789, in line with the scheme’s annual pension
increases. 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
fnancial performance measures. The balance of the bonus opportunity is based on fnancial measures and/
or the delivery of strategic/individual objectives. Performance measures are determined each year refecting
the business priorities that underpin Group strategy. The Committee has discretion to vary the bonus payout
should any formulaic output not refect 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.
65
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Annual Report on Remuneration continued
2021/22 opportunity
For the 2021/22 annual bonus scheme, no changes in quantum are proposed in respect of the Executive Directors,
which will remain at 100% of salary. Despite the continuing uncertainty surrounding the ongoing impact of COVID-19
on current trading conditions, the current pay-out at threshold of 20% will be retained and on-target performance will
return to the normal 50% pay-out level.
Vesting in respect of performance during 2020/21 (2018/19 LTIP award)
LTIP awards granted in 2018/19 were subject to the achievement of the metrics in the following table. Whilst the
formal vesting date is in December 2021, the three-year performance period ended on 2 October 2021 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
Base
Threshold
at 25%
On-target
50% vesting
Maximum
100% vesting
Actual
Vesting
% of max
40%
40%
20%
10.5% Base +0.25% Base +0.5%
£300m Base +7.5% Base +15%
Median
–
–
Base +1.0%
Base +30%
2.7%
£126.6m
Upper quintile Below median
0%
0%
0%
• FCF is set as a three-year cumulative amount.
• Relative TSR against the FTSE 250 Index (excluding Investment Trusts).
2019/20 awards
The 2019/20 LTIP award was granted in December 2019, prior to the disposal of Marston’s Beer Company into
the partnership with Carlsberg. Performance targets were set at the time with the assumption that the beer company
would remain a part of the Group and contribute to the underlying EPS number. The beer company proft in 2019
equates to a 5.1p contribution to the underlying EPS target. The revised targets and ranges are shown below.
The Committee is satisfed that this adjustment maintains the stretch in the original targets and is being made as a
result of the partnership with Carlsberg and not to mitigate for the impact of COVID-19 or general market conditions.
NCF and relative TSR targets and ranges will remain unchanged.
Underlying EPS
NCF
TSR v FTSE 250 (excluding Investment Trusts)
40%
40%
20%
7.7p
£100m
Median
8.0p
£125m
–
8.6p
£150m
Upper quartile
Weighting
Thresho d at 25% On-target 50% vesting Maximum 100% vesting
l
As discussed in the Annual Statement, the performance measures for the annual bonus have been revised to align
with key strategic measures and as a result of the change in the LTIP performance measures.
Strategic pillar
We will Grow
We are Guest Obsessed
We Raise the Bar
Performance measure
% weighting for 2021/22
EBITDA (financial)
Free cash flow (financial)
Performance v Peach (strategic)
Guest – Reputation.com (strategic)
Employee Engagement (strategic)
30%
40%
10%
10%
10%
The Directors consider that the annual bonus targets for 2021/22 fnancial year are commercially sensitive matters
as they provide competitors with insight into our business plans and expectations, and therefore they should remain
confdential 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.
Any bonus earned in excess of 40% of maximum will be deferred into shares for a period of three years.
Variable elements: 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 fnancial 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 refect 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 refect dividends that would have been paid
on vested awards under the LTIP from the end of the performance period until the date of release.
66
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Annual Report on Remuneration continued
Granted during 2020/21
LTIP awards granted in May 2021 were as follows:
2020/21
Percentage
of salary
Number
of shares
Face value
at grant1
% of award
vesting at threshold
Performance period
Holding period
Andrew Andrea
Ralph Findlay
125%
125%
510,295 £491,159
761,924 £733,352
25%
Financial periods
25% 2020/21–2022/2023 2023/24–2024/25
Financial periods
1. Calculated using the mid-market share price at date of grant of £0.9625.
Appropriate provisions have been included in the terms of the awards to enable the Committee to adjust the vesting
outturn having regard to any windfall gain.
As previously 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 2020/21 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 (Cumulative)²
TSR v FTSE 250 (excluding Investment Trusts)
1. Underlying EPS excludes income from associates.
Weighting
Threshold at 25% On-target 50% vesting Maximum 100% vesting
40%
40%
20%
6.4p
£200m
Median
6.9p
£215m
7.2p
£240m
– Upper quartile
2.In order to ensure that performance is assessed on a like for like basis the Committee retains the flexibility to adjust the cumulative NCF targets (up or
down) in the event that the contingent payment from Carlsberg UK is materially different to the amount assumed in the 5-year plan.
3. Straight-line vesting applies between threshold, on-target and maximum performance.
2021/22 awards
Recognising the importance of the Leadership Group and their contribution to the ‘Back to a billion’ plan, participation
in the 2021/22 LTIP is being extended to include all members of the Leadership Group.
For the Executive Directors, it is intended that awards under the LTIP in 2021/22 will be granted at the level of
125% of salary. As set out in the Annual Statement, it is proposed to apply the following performance measures and
weightings to the plan.
Underlying PBT
NCF (Cumulative)
TSR v FTSE 250 (excluding Investment Trusts)
Weighting
Threshold at 25% On-target 50% vesting Maximum 100% vesting
40%
40%
20%
£63.65m
£125m
Median
£67.0m
£150m
£68.67m
£182m
– Upper quartile
The Committee has decided to replace underlying EPS with underlying PBT for the 2021/22 LTIP. A pre-tax measure
is considered to be a more appropriate measure of proftability for Marston’s as this mitigates the risk of EPS volatility
67
caused by tax losses to be carried forward in future fnancial periods. This is also considered to be a more relevant
metric taking into account the extended participation in the LTIP given the better line of sight for participants. As noted
above, in order to ensure that performance is assessed on a like-for-like basis the Committee retains the fexibility
to adjust the cumulative NCF targets (up or down) in the event that the contingent payment from Carlsberg UK is
materially different to the amount assumed in the 5-year plan.
Non-executive Directors
Directors’ Remuneration Policy
Non-executive Directors’ fees are usually reviewed every two years and are set at a level that refects market
conditions and is suffcient 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, chairing a Committee or Senior Independent Director
responsibilities or holding the position of Non-executive Director responsible for employee engagement).
Total remuneration (Chair and Non-executive Directors) (audited)
Bridget Lea
Octavia Morley1
Matthew Roberts
William Rucker
Past Directors
Carolyn Bradley2
Base Fee
£
i
Comm ttee Chair
£
SID
£
2020/21 Total
£
2019/20 Tota 3
l
£
54,000
54,000
54,000
200,000
–
7,500
7,500
–
–
1,250
–
–
54,000
62,750
61,500
200,000
50,400
41,563
57,400
166,667
45,000
–
6,250
51,250
57,400
1. 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. Octavia was appointed as Senior Independent Director (SID) with effect from 1 August 2021.
2.Carolyn Bradley stepped down from the Board on 31 July 2021.
3.In the 2019/20 financial 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. 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 Chair voluntarily reduced his base fee by 50% for the same period (to £166,667).
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Annual Report on Remuneration continued
Fees
The Chair and other Non-executive Directors fees were last reviewed in October 2020 and it was agreed that an
increase was not appropriate at that time. Fees were last increased with effect from 30 September 2018. The Chair’s
fee and Non-executive Director fee structure were reviewed by the Committee and the Board respectively in
October 2021. Taking into account the increased responsibilities and duties placed on each Non-executive Director,
the time commitment required, time lapsed since the last change in fees and with regard to market practice, the fees
that will apply from 1 October 2021 are set out below.
Chair’s fee
Non-executive Director basic fee
Additional fee for:
Chairing the Audit Committee
Chairing the Remuneration Committee
Senior Independent Director
2021/22
2020/21
£206,000 £200,000
£54,000
£55,500
£10,000
£10,000
£10,000
£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 benefcial interests of the Non-executive Directors and their connected persons in the share capital of the
Company are shown below:
Carolyn Bradley1
Bridget Lea²
Octavia Morley
Matthew Roberts
William Rucker
As at 02.10.21
li
(or, if ear er, date
of resignation)
As at 03.10.20
(or, if later, date of
appointment)
25,000
50,000
25,000
25,000
200,000
25,000
50,000
25,000
25,000
200,000
1. Carolyn Bradley stepped down from the Board on 31 July 2021. Her interests in ordinary shares are shown as at that date.
2. Bridget Lea advised the Company, in February 2021, of an additional purchase of 25,000 shares that had taken place in June 2020.
Payments to past Directors and payment for loss of offce (audited)
Ralph Findlay retired from the Company on 2 October 2021 after more than 25 years’ service with the Group.
Up to that date, Ralph received his ordinary remuneration, details of which are included in the single total fgure of
remuneration table on page 64. Ralph also received a payment of £88,002 in lieu of accrued annual leave and
gift vouchers with a value of £350 (awarded to retirees with 25 years plus service).
68
Having regard to his cessation due to retirement and his long service with the Group, the Committee determined
that Ralph should be treated as a ’good leaver’ for the purposes of his LTIP awards. He has retained these awards,
which remain subject to their performance conditions and a pro-rata reduction to refect the proportion of the
performance period for which he remained in service. Following vesting, the awards will remain subject to the
originally envisaged two year holding period. Details of the outstanding awards are set out below.
Year in respect of wh ch the award was granted
i
2019/20 LTIP
2020/21 LTIP
Number of shares
originally subject to
award
Maximum number
of shares subject to
award after
pro-rata reduction
555,620
761,924
370,413
253,974
As noted on page 66 the 2018/19 LTIP has lapsed in full.
Ralph also retained his SAYE option, which may be exercised in accordance with the rules of the scheme.
The Company will also continue to make a contribution of 50% towards the premium for continuing private
medical insurance.
Total shareholder return chart and CEO remuneration
This graph shows the value, at 2 October 2021, of £100 invested in the Company on 1 October 2011 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 fnancial period ends.
Marston’s TSR
FTSE All Share TSR
£
350
300
250
200
150
100
50
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
2 October
2021
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Annual Report on Remuneration continued
The total remuneration of the CEO over the past ten fnancial periods is shown below. The annual bonus pay-out and
LTIP vesting level as a percentage of the maximum opportunity is also shown.
2020/21
2019/20
2018/19
2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
Total
i
remunerat on
£
l
Annua
bonus
(% of maximum)
LTIP
vesting
(% of maximum)
711,612
592,423
722,432
807,665
803,303
1,008,320
876,788
1,121,294
937,312
815,690
0%
0%
0%
17.7%
20%
40%
40%
25%
0%
40%
0%
0%
0%1
0%
0%
21%
0%
41.9%
44.2%
0%
Change in remuneration of Directors and employee pay
The table below shows how each Director’s remuneration has changed between the periods ended 2 October
2021 and 3 October 2020 and for the 2019 period end. 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.
Salary/fees1
Taxable
benefits
2020/21 and
2019/20
2019/20 and
2018/19
2020/21 and
2019/20
2019/20 and
2018/19
Wider
workforce
2.9%
Ra ph
l
Findlay
2%
Andrew
Andrea
2%
6.4%
2%
2%
See note 2
5.8%3
5.8%3
William
Rucker
No
change
No
change
N/A
Bridget
Lea
No
change
No
change
N/A
Octavia
Mor ey
l
No
change
No
change
N/A
Matthew
Roberts
No
change
No
change
N/A
See note 2
4.1%
(6.3%)
N/A
N/A
N/A
N/A
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
Annual bonus4 2020/21 and
See note 4
N/A5
N/A5
N/A
N/A
N/A
N/A
waived their rights to this award.
69
2019/20
2019/20 and
2018/19
Notes
See note 4
N/A
N/A
N/A
N/A
N/A
N/A
1. Salary/fee reviews for the Executive Directors, Non-executive Directors, and salaried workforce are effective 1 October. However, whilst Marston’s
accounting reference date is 30 September, the Group reports on a 52 week basis and, therefore, the period end date changes from year to year.
The year-on-year comparisons in the table above are based on the salaries/fees applying with effect from 1 October. Average employee change to
salary is calculated by reference to the mean of employee pay. The majority of pub-based employees have their remuneration set by statute rather than
the market.
2.No changes to benefit policy. Premiums for private medical insurance may vary from year to year. Eligibility to receive the individual benefits under the
policy may be determined by an employee’s role or length of service, where applicable.
3.During the 2019/20 period, during the first national lockdown, those employees who continued to work 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 car allowance element of the
benefits policy was subject to the 20% voluntary reduction during the same period. The increase in the Executive Directors’ benefits from 2019/20 to
2020/21 therefore reflects the ending of this reduction.
4.No bonuses were payable in respect of 2020/21, or the prior period, based on Group performance. Bonuses and other discretionary payments
were earned by a number of employees, within the wider workforce, during the prior period; details of which are set out on pages 59 to 60 of the
2020 Annual Report and Accounts.
5.No bonuses were earned by the Executive Directors in 2020/21 or the prior period.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Annual Report on Remuneration continued
CEO pay ratio
This is the second 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 fgure of remuneration compares with the equivalent fgures for
UK employees.
Year
2020/21
2019/20 (based on contractual salary and benefits)
2019/20 (reflecting voluntary reduction in salary
and benefits)
25th percentile
Method
Option B
Option B
Option B
pay ratio Median pay ratio
44:1
45:1
37:1
47:1
48:1
40:1
75th percentile
pay ratio
43:1
41:1
34:1
We have chosen Option B which uses the hourly rate data from the most recent Gender Pay Gap reporting.
This represents the most effcient 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. Comparing the 2019/20 pay ratio and 2020/21 pay ratio on a
like-for-like basis, i.e. ignoring the voluntary reduction in salary and benefts, the pay ratios at each quartile are
broadly consistent with each other, this is due to the nil vesting of variable incentive arrangements for the CEO in both
fnancial years. 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 2021. Sensitivity analysis was performed around the 25th,
median and 75th percentile employees to ensure that they were reasonably representative.
The table below shows the UK employee percentile pay and benefts used to determine the above pay ratios
and the salary component for each fgure. The CEO remuneration is the single fgure of total remuneration for the
year ended 2 October 2021 as disclosed on page 64. Two sets of pay ratios are included in the table above for
2019/20, refecting Ralph Findlay’s voluntary reduction in salary and benefts during the period from April to July
2020 and his contractual salary and benefts for 2019/20. A substantial proportion of the CEO’s total remuneration
is performance-related and delivered in shares. The ratios will therefore depend signifcantly on the CEO’s annual
bonus and long-term incentive outcomes and may fuctuate year-on-year.
CEO
£
25th percentile
£
50th percentile
£
75th percentile
£
586,682
711,612
15,215
15,215
16,216
16,216
16,544
16,544
Component
Base salary
Total remuneration
70
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
2020/21
2019/20
% change
£0m
£186.7m
£30.4m
£229.5m
(100)%
(18.6)%
1. No distributions by way of share buybacks were made to shareholders during the 2020/21 or 2019/20 financial years.
2.Excluding non-underlying items.
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
£78,183. Andrew Andrea is a Non-executive Director of Portmeirion Group Plc and during the year he received fees
of £35,738.
Shareholder voting
The following table sets out actual voting outcomes in respect of the Annual Report on Remuneration resolution at the
Annual General Meeting (AGM) held on 27 January 2021 and the Directors’ Remuneration Policy resolution at the
AGM held on 24 January 2020.
Approval of the Annual Report on
Remuneration (27 January 2021)
Approval of the Directors’ Remuneration
Policy (24 January 2020)
Votes for
70,200,064
% of vote
Votes against
86.35% 11,097,024
% of vote
Votes withheld
13.65% 1,227,598
89,792,873
86.05% 14,551,016
13.95%
131,691
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Annual Report on Remuneration continued
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 satisfed. 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 frst 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 fnancial year before 2019/20.
Executive Directors’ interests in share options as at 2 October 2021
Andrew Andrea
Ralph Findlay
LTIP
SAYE
LTIP
Grant date1
2017
20182
20193
May 2021
2018
2017
20182
20193
May 2021
Brought forward
04.10.20
382,500
473,033
372,124
–
20,224
571,115
706,287
555,620
–
Directors’ share interests (audited)
As at 2 October 2021, Andrew Andrea held shares worth 120% of base salary and Ralph Findlay held in excess of
200% of base salary in shares.
Executive Directors’ share interests as at 2 October 2021
Andrew Andrea
Ralph Findlay
Shares owned
i
outr ght
Share opt ons
i
At 02.10.21
At 03.10.20
j
Not sub ect to
performance
Subject to
performance
332,773
352,773
1,314,475 1,290,475
0 1,355,452
20,224 2,023,831
Target %
of salary
200%
200%
Actual % of
l
sa ary holding
120%
313%
In assessing the extent to which the guidelines are satisfed, shares are valued at the end of the relevant fnancial 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.
Granted
Exercised/ vested
Cance led/ apsed
l
l
–
–
510,295
–
–
–
–
761,924
–
–
–
–
–
–
–
–
–
382,500
–
–
–
–
571,115
–
–
–
Carried forward
02.10.21
0
473,033
372,124
510,295
20,224
0
706,287
555,620
761,924
Exercise pr ce £
i
Vesting date
Release date
0.89
2020
2021
2022
2023
2021
2020
2021
2022
2023
N/A
2023
2024
2025
N/A
2022
2023
2024
2025
1. Awards granted annually in December, unless otherwise stated.
2.The performance conditions applying to the 2018/19 LTIP are set out on page 67 of the 2019 Directors’ Remuneration Report.
3.The performance conditions applying to the 2019/20 LTIP are set out on page 67 of the 2020 Directors’ Remuneration Report.
There have been no changes to the Directors’ share interests and interests in share options between 2 October 2021 and 28 November 2021 (being the latest practical date prior to the date of this report).
71
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Annual Report on Remuneration continued
Service contracts
During the period, Executive Directors’ contracts were reviewed and a new contract agreed. Both Andrew Andrea
and Hayleigh Lupino were appointed on the new contract. Executive Directors’ contracts are on a rolling 12-month
basis and are subject to nine months’ notice when terminated by either party.
The current Non-executive Directors, including the Chair, 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 appointment and their appointment and subsequent re-appointment is subject to annual approval
by shareholders.
Commencement date
Name
Andrew Andrea1 3 October 2021
Hayleigh Lupino2 3 October 2021
William Rucker 1 October 2018
Octavia Morley 1 January 2020
i
Unexp red term rema n ng as at 2 October 2021
i
i
Terminable on nine months’ notice
Terminable on nine months’ notice
Fixed term expiring on 30 September 2024 (subject to renewal) and
terminable on six months’ notice
Fixed term expiring on 31 December 2022 (subject to renewal) and
terminable on one month’s notice
Bridget Lea
1 September 2019 Fixed term expiring on 31 August 2022 (subject to renewal) and terminable on
Matthew Roberts 1 March 2017
one month’s notice
Fixed term expiring on 28 February 2023 (subject to renewal) and terminable
on one month’s notice
1. Andrew Andrea’s previous appointment as Chief Financial Officer commenced on 31 March 2009. His appointment as Chief Executive Officer
commenced on 3 October 2021.
2.Hayleigh Lupino’s appointment as Chief Financial Officer commenced on 3 October 2021.
Further details on current serving Directors’ service contracts and letters of appointment are available at
www.marstonspubs.co.uk in the Investors section.
This report was approved by the Board and signed on its behalf by
Octavia Morley
Chair of the Remuneration Committee
30 November 2021
72
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
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 Chair’s Statement on
page 5, to the Statement of Directors’ Responsibilities on
page 75, 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 fulfls the requirements of the
Strategic Report can be found on pages 2 to 45,
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
47 and is incorporated into this report by reference.
Dividends
Due to the signifcant disruption to trading, caused by
the COVID-19 global pandemic, no dividend payments
are planned in respect of the 2020/21 fnancial
year. The Group continues to review the timing of the
resumption of dividend payments in earnest.
Directors
Biographies of the Directors currently serving
on the Board are set out on pages 48 and 49.
Changes to the Board during the period are set out in
the Corporate Governance Report starting on page 47.
Details of Directors’ service contracts are set out in the
Directors’ Remuneration Report on page 72 and their
shareholdings are set out on page 71.
73
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
25 January 2022.
Directors’ shareholdings
The interests of Directors and their connected persons in
the shares of the Company are set out on page 71 of the
Directors’ Remuneration Report.
Directors’ indemnities and insurance
The Company maintains Directors’ and Offcers’ Liability
Insurance in respect of legal action that might be brought
against its Directors and Offcers. In accordance with
the Company’s Articles of Association and to the extent
permitted by law, the Company has indemnifed each
of its Directors and other Offcers 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
2 October 2021 and as at the date of the report.
There are no indemnities in place for the beneft of the
external Auditor.
Directors’ powers
Under the Articles of Association, the Directors
have authority to allot ordinary shares subject to the
aggregate set at the 2021 Annual General Meeting
(AGM). The Company was also given authority at its
2021 AGM to make market purchases of ordinary
shares up to a maximum number of 63,404,927 shares.
Similar authority will again be sought from shareholders
at the 2022 AGM. The powers of the Directors are
further described in the Corporate Governance Report
on pages 47 to 56.
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 28 in
the fnancial 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 specifc 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 5
to the fnancial statements on pages 102. 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.
Ordinary shares of 7.375 pence each
Shareholder
Nortrust Nominees Ltd
Dimensional Fund Advisors LLP
The Capital Group Companies, Inc
Standard Life Aberdeen plc
Brewin Dolphin
Royal London Asset Management Limited
Signifcant shareholders
Notifcations 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 fnancial 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 notifed, however, notifcation of any
change is not required until the next notifable threshold
is crossed.
Subsequent to the year-end, Nortrust Nominees Limited
has disclosed information in accordance with DTR5 on
19 October 2021, disclosing an indirect interest over
9,859,977 voting rights (5.27%).
No further notifcations have been received by
the Company between 2 October 2021 and
28 November 2021 (being the latest practical date
prior to the date of this report).
As at 2 October 2021
Voting rights
% of
voting rights
9,859,977
9,339,455
9,291,379
9,228,860
8,392,338
6,794,023
5.27%
4.98%
4.96%
4.93%
4.93%
3.99%
Nature of
interest
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Directors’ Report continued
The Company also discloses the following information, obtained from the Register of Members, for the
preference shares:
Preference shares
Shareholder
Fiske Nominees Limited
Mrs HM Medlock
George Mary Allison Limited
Rulegale Nominees Limited
Mr PF and Dr K Knowles
Mr N Aston and Mr TA Southall
CGWL Nominees Limited
Mrs H Michels
Mr R Somerville
% of
preference
share voting rights
42.06%
13.88%
7.33%
6.07%
5.81%
3.81%
3.74%
3.67%
3.67%
Number
31,548
10,407
5,500
4,550
4,356
2,855
2,805
2,750
2,750
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 signifcant
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 offce or employment that occurs because of a
takeover bid.
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.
Employee information
The average number of employees within the Group is
shown in note 5 to the fnancial statements on page 102.
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 refected in
how we attract talent, how we nurture and develop
people internally, and how we ensure our guests have
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.marstonspubs.co.uk/
responsibility
74
Modern Slavery Statement
Our Modern Slavery Act disclosure is available on our
website www.marstonspubs.co.uk/responsibility and
more details can be found on page 40.
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 guest satisfaction studies.
Greenhouse gas emissions, energy
consumption and energy effcient action
One of our key priorities is to reduce our environmental
impact. We recognise the importance of this to the
long-term proftability 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 pages 41 and 42 in our Strategic Report.
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 fnancial
instruments by the Group together with details of our
treasury policy and management are set out in note 25
to the fnancial statements on pages 116 to 120.
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 2022 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 fnancial
position of the Group is described on pages 18 to 21.
Further details are set out in the fnancial statements on
pages 85 to 137. In addition, note 25 to the fnancial
statements on pages 116 to 120 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 fnancial instruments and hedging activities
are also provided in note 25.
Accordingly, the fnancial statements set out on pages
85 to 127 and 128 to 137 have been prepared on the
going concern basis.
Annual General Meeting
The AGM of the Company will be held on 25 January
2022 at The Farmhouse at Mackworth, 60 Ashbourne
Road, Derby DE22 4LY. 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.marstonspubs.co.uk/investors where a copy
can be viewed and downloaded.
By order of the Board
Anne-Marie Brennan
Group Secretary
30 November 2021
Company registration number: 31461
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
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 fnancial
statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare Group
and parent Company fnancial statements for each
fnancial year. Under that law they are required to
prepare the Group fnancial statements in accordance
with international accounting standards in conformity
with the requirements of the Companies Act 2006
and applicable law and have elected to prepare the
parent Company fnancial statements in accordance
with UK accounting standards and applicable law,
including FRS 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland. In addition
the Group fnancial statements are required under
the UK Disclosure Guidance and Transparency Rules
to be prepared in accordance with International
Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the
European Union.
Under company law the directors must not approve the
fnancial statements unless they are satisfed that they
give a true and fair view of the state of affairs of the
Group and parent Company and of the Group’s proft
or loss for that period. In preparing each of the Group
and parent Company fnancial 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 fnancial statements, state whether
they have been prepared in accordance with
international accounting standards in conformity with
the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union;
• for the parent Company fnancial statements, state
whether applicable UK accounting standards have
been followed, subject to any material departures
disclosed and explained in the parent Company
fnancial 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 suffcient to show and
explain the parent Company’s transactions and disclose
with reasonable accuracy at any time the fnancial
position of the parent Company and enable them to
ensure that its fnancial statements comply with the
Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable
the preparation of fnancial statements that are free from
material misstatement, whether due to fraud or error,
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 fnancial information
included on the Company’s website. Legislation in
the UK governing the preparation and dissemination
of fnancial statements may differ from legislation in
other jurisdictions.
Responsibility statement of the Directors
We confrm that to the best of our knowledge:
• the fnancial statements, prepared in accordance
with the applicable set of accounting standards, give
a true and fair view of the assets, liabilities, fnancial
position and proft 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 offce at the date of approval of
this Directors’ Report confrm 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 themselves aware of any relevant audit
information and to establish that the Company’s Auditor
is aware of that information.
Andrew Andrea
Chief Executive Offcer
Hayleigh Lupino
Chief Financial Offcer
30 November 2021
75
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Additional Information
Financial
Statements
Independent Auditor’s Report
Group Accounts
Notes to the Group Accounts
Company Accounts
Notes to the Company Accounts
77
85
92
128
130
76
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
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 have audited the financial statements of Marston’s PLC (“the Company”) for the 52 week period ended
2 October 2021 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 2 October 2021 and of the Group’s profit for the period then ended;
• the Group financial statements have been properly prepared in accordance with International Accounting
Standards in conformity with the requirements of the Companies Act 2006;
• 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 to the extent applicable.
77
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.
We were first appointed as auditor by the shareholders on 24 January 2020. The period of total uninterrupted
engagement is for the two financial years ended 2 October 2021. 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
£9.0million (2020: £10.0million)
0.4% (2020: 0.4%) of total assets
100% (2020:100%) of Group total assets
vs 2020
Going Concern
Valuation of the estate
Valuation of the derivative financial instruments
New: Accounting for the disposal of the brewing business
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Independent Auditor’s report to the members of Marston’s PLC continued
2. Material uncertainty related to going concern
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 or
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.
The risk
Disclosure quality
Our response
Our procedures included:
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.
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
scenario, particularly whether this downside scenario reflects 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 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.
78
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
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 decreasing
order of audit significance, 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.
Valuation of the estate
(Group – £1.529.9 million; 2020: £1,625.5 million
Downwards revaluation: £100.5 million; 2020: £234.9 million)
(Parent company – £172.0 million; 2020: £266.1 million
Revaluation: £23.1; 2020: £47.3 million)
Refer to page 58 Audit Committee Report, page 95 accounting policy,
and pages 107 to 110 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 and buildings and ‘effective freehold’ leasehold properties
held at fair value is a key area of estimation.
The valuation involves the determination of estimates, most noticeably 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 strength of the Group’s and parent
Company’s balance sheet which we consider is a fraud risk.
The effect of these matters is that, as part of our risk assessment, we
determined that valuation of the estate 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, and possibly many times
that amount. The financial statements (note 11) disclose the range estimated
by the Group.
• Assessing valuation approach: We met with the Group’s external valuers
to understand the assumptions and methodologies used in valuing the
properties and the market evidence used by the external valuers to support
their assumptions. We also obtained an understanding of Directors’
involvement in the valuation process to assess whether appropriate oversight
has occurred;
• Assessing valuer’s credentials: We critically assessed the independence,
professional qualifications, competence, and experience of the external
valuers engaged by the Group;
• Assessing triggers for impairment: We assessed the appropriateness and
completeness of impairment triggers identified;
• Benchmarking assumptions: We challenged the key assumptions, with the
assistance of our KPMG valuation specialists, being the applicable trading
multiples and fair maintainable trade, for a sample of properties by making a
comparison to market comparable data;
• Assessing inputs: We checked observable inputs used for a sample of
assets in the valuation to source documentation;
• Assessing outputs: We evaluated and challenged the output of the
valuations, through the identification of higher risk assets through comparison
to market and prior period information; 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.
79
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
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)
Valuation of financial instruments
(£170.5 million; 2020: £222.4 million)
Refer to page 58 Audit Committee Report, page 97 accounting policy
and page 116 to120 financial disclosures.
The risk
Subjective Valuation:
Our response
Our procedures included:
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 the interest rate swaps is 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 Group’s Income Statement.
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. The financial
statements (note 25) disclose the sensitivity estimated by the Group.
• Third party confirmations: We obtained third party confirmations for the
market value of the interest rate swaps;
• Specialist valuation assessments: We independently valued 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 financial instruments to be acceptable.
Accounting for the disposal of the brewing business
Accounting treatment:
Our procedures included:
(Profit on disposal of subsidiary: £290.5 million: 2020: £nil)
Refer to page 58 Audit Committee Report, page 93 accounting policy and
page 104 to 105 financial disclosures.
The disposal of the brewing business is a material transaction outside of
the normal course of business with a related party which are indicators of
significant risk. Such transactions have a higher risk of fraud and error in that
they may not be at arms’ length and it may not be correctly accounted for
due to its unusual nature.
• Evaluating accounting treatment: We evaluated the accounting treatment
for the disposal group held for sale in line with the requirements of the
relevant accounting standards;
• Valuation assessment: We assessed management’s calculation of fair
value of the contingent consideration using our own KPMG valuation
specialists and agreed the book value of the assets transferred to underlying
account records;
• Evaluating transaction terms: We evaluated the terms of the transaction to
assess its accounting treatment;
• Assessing disclosures: We critically assessed the adequacy of the Group’s
disclosures in respect of the disposal; and
• Evaluating directors intent: We assessed the purpose of the transaction as
well as the arms’ length nature of trade post transaction through inspection of
trade agreements.
Our results
• We found the accounting and disclosure of the disposal to be acceptable.
In the prior year we reported a key audit matter in respect of the impact of uncertainties due to the UK exiting
the European Union. Following the trade agreement between the UK and the EU, and the end of the EU-exit
implementation period, the nature of these uncertainties has changed. We continue to perform procedures over
material assumptions in forward looking assessments, such as going concern and impairment tests, however we no
longer consider the effect of the UK’s departure from the EU to be a separate key audit matter.
In the prior year we also reported a key audit matter in respect of the carrying amount of goodwill in relation to the
Pubs and Bars cash generating unit. However this balance was fully impaired in the prior year and, therefore it is not
identified as a key audit matter in our report this year.
We performed the detailed tests above for each key audit matter rather than seeking to rely on any of the Group’s
controls because our knowledge of the design of these controls indicated that we would not be able to obtain the
required evidence to support reliance on controls.
80
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Independent Auditor’s report to the members of Marston’s PLC continued
4. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £9.0 million (2020: £10 million), determined
with reference to a benchmark of Group total assets (of which it represents 0.4% (2020: 0.4%)).
Group total assets
£2,467.9 million
(2020: £2,531.9 million)
Group Materiality
£9.0 million (2020: £10.0 million)
£9.0 million
Whole financial statements materiality (2020: £10.0 million)
In addition, we applied materiality of £3.3 million (2020: £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.
We consider total assets to be the most appropriate benchmark given the majority of total asset value is in the pub
estate and these assets act as security for the Group’s securitised borrowings, and will therefore be a focus of users
of the accounts.
Materiality for the parent Company financial statements as a whole was set at £8.0 million (2020: £8.3 million),
determined with reference to a benchmark of parent Company total assets, (of which it represents 0.5%
(2020: 0.6%)).
In line with our audit methodology, our procedures on individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances add up to a material amount across the financial statements
as a whole. Performance materiality was set at 75% (2020 : 75%) of materiality for the financial statements as a
whole, which equates to £6.8 million (2020 : £7.5 million) for the Group and £6 million (2020 : £6.2 million) for the
parent Company. We applied this percentage in our determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding
£0.5 million (2020: £0.5 million), in addition to other identified misstatements that warranted reporting on
qualitative grounds.
We subjected the Group’s only associate to a full scope audit as we determined it was financially significant.
Materiality was set at £5.6 million based on its relative size adjusting for Marston’s 40% share in the business.
The Group team performed the audit of the Group as if it was a single aggregated set of financial information.
The audit was performed using the materiality and performance materiality level set out above.
£5.6 million
Materiality applied to the audit of Marston’s sole associate,
Carlsberg Marston’s Brewing Company Limited (CMBC)
Total Assets
Group materiality
£0.5 million
Misstatements reported to the Audit Committee (2020: £0.5 million)
Group revenue
Group profit before tax
Group total assets
100%
(2020 100%)
100
100
100%
(2020 100%)
100
100
100%
(2020 100%)
100
100
Full scope for Group audit purposes 2021
Full scope for Group audit purposes 2020
81
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Independent Auditor’s report to the members of Marston’s PLC continued
5. Going concern basis of preparation
6. Fraud and breaches of laws and regulations – ability to detect (continued)
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the
Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s
financial position means that this is realistic for at least a year from the date of approval of the financial statements
(“the going concern period”). As stated in section 2 of our report, they have also concluded that there is a material
uncertainty related to going concern.
An explanation of how we evaluated management’s assessment of going concern is set out in section 2 of our report.
Our conclusions based on this work:
• We consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial
statements is appropriate;
• We have nothing material to add or draw attention to in relation to the Directors’ statement in note 1 to the
financial statements on the use of the going concern basis of accounting, and their identification therein of a
material uncertainty over the Group and Company’s ability to continue to use that basis for the going concern
period; and
• The related statement under the Listing Rules set out on page 47 is materially consistent with the financial statements
and our audit knowledge .
6. Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment
procedures included:
• Enquiring of Directors, the Audit Committee, internal audit and inspection of policy documentation as to the
Group’s/Company’s high-level policies and procedures to prevent and detect fraud, including the internal audit
function, and the Group’s/Company’s channel for “whistleblowing”, as well as whether they have knowledge of
any actual, suspected or alleged fraud.
• Reading board, Audit Committee and remuneration committee minutes.
• Considering remuneration incentive schemes and performance targets.
• Using analytical procedures to identify any unusual or unexpected relationships.
• Considering the existence of any significant unusual transactions.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud
throughout the audit.
As required by auditing standards, we perform procedures to address the risk of management override of controls, in
particular the risk that Group and component management may be in a position to make inappropriate accounting
entries and the risk of bias in accounting estimates and judgements such as the valuation of the estate, valuation
of derivatives and pension assumptions. On this audit we do not believe there is a fraud risk related to revenue
recognition because Group revenue is generated mainly from retail through the operation of pubs. Retail revenue
contains no significant judgements, and is comprised of a large number of small simple transactions that are received
in cash or credit card receivables at the point of sale. Therefore, there is limited opportunity for management
manipulation or to fraudulently post the volume of transactions that would be required to have a material impact
on revenue.
We also identified a fraud risk related to the disposal of the brewing business given it is a significant unusual
transaction with a related party. Further detail in respect of this area is set out in the key audit matter disclosures in
section 3 of this report.
In determining the audit procedures we took into account the results of our evaluation and testing of the operating
effectiveness the design of some of the Group-wide fraud risk management controls (Audit Committee report on
page 57).
We performed procedures including:
• Identifying journal entries to test based on risk criteria and comparing the identified entries to supporting
documentation. These included journal entries made to unusual accounts related to revenue, cash and loans
and borrowings.
• Evaluated the business purpose of significant unusual transactions.
We discussed with the Audit Committee, other matters related to actual or suspected fraud, for which disclosure is not
necessary, and considered any implications for our audit.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
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) 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.
82
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Independent Auditor’s report to the members of Marston’s PLC continued
6. Fraud and breaches of laws and regulations – ability to detect (continued)
7. We have nothing to report on the other information in the
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 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 or the loss of the Group’s licence to operate. We identified the following areas as those most
likely to have such an effect: the Pubs Code, health and safety, anti-bribery, employment law, regulatory capital
and liquidity, and certain aspects of company legislation 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. Therefore if
a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not
detect that breach.
We discussed with the Audit Committee matters related to actual or suspected breaches of laws or regulations,
for which disclosure is not necessary, and considered any implications for our audit.
Context of the ability of the audit to detect fraud or breaches of law or regulation
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
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 fraud, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all laws and regulations.
7. We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report 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.
Annual Report (continued)
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
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’
disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our
audit knowledge.
Based on those procedures, 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 Viability statement (page 31) 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;
• the Principal Risks disclosures describing these risks, and how emerging risks are identified, and explaining how they
are being managed and mitigated; and
• the Directors’ explanation in the Viability Statement of how they have 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.
We are also required to review the Viability Statement set out on page 31 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures are materially consistent with the financial statements and
our audit knowledge.
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 Company’s longer-term viability.
83
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Independent Auditor’s report to the members of Marston’s PLC continued
7. We have nothing to report on the other information in the
9. Respective responsibilities
Annual Report (continued)
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’
corporate governance disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial
statements and our audit knowledge:
• 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;
• the section of the annual report describing the work of the Audit Committee, including the significant issues that the
Audit Committee considered in relation to the financial statements, and how these issues were addressed; and
• the section of the annual report that describes the review of the effectiveness of the Group’s risk management and
internal control systems.
We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with
the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing
to report in this respect.
Directors’ responsibilities
As explained more fully in their statement set out on page 75, 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 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 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 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.
8. We have nothing to report on the other matters on which we are required to
10. The purpose of our audit work and to whom we owe our responsibilities
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 made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
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
30 November 2021
84
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Income Statement
For the 52 weeks ended 2 October 2021
Continuing operations
Revenue
Operating expenses
Loss from associates
Operating (loss)/profit
Finance costs
Finance income
Interest rate swap movements
Contingent consideration fair value movement
Net finance costs
Loss before taxation
Taxation
Loss for the period from continuing operations
Discontinued operations
Profit/(loss) for the period from discontinued operations
(Loss)/profit for the period attributable to equity shareholders
2021
Non-
underlying
(note 4)
£m
–
(96.2)
–
(96.2)
(2.0)
–
8.4
20.0
26.4
(69.8)
27.7
(42.1)
289.4
247.3
Underlying
£m
401.7
(396.0)
(14.5)
(8.8)
(93.4)
0.9
–
–
(92.5)
(101.3)
15.1
(86.2)
1.7
(84.5)
Note
3
3
12
4
6
6
4, 6
4, 6
4, 6
4, 7
8
The results for the current period reflect the 52 weeks ended 2 October 2021 and the results for the prior period reflect the 53 weeks ended 3 October 2020.
Earnings/(loss) per share:
Basic earnings/(loss) per share
Total
Continuing
Discontinued
Basic underlying (loss)/earnings per share
Total
Continuing
Discontinued
Diluted earnings/(loss) per share
Total
Continuing
Discontinued
Diluted underlying (loss)/earnings per share
Total
Continuing
Discontinued
85
Total
£m
Underlying
£m
2020
Non-
underlying
(note 4)
£m
401.7
(492.2)
(14.5)
(105.0)
(95.4)
0.9
8.4
20.0
(66.1)
(171.1)
42.8
(128.3)
291.1
162.8
515.5
(458.8)
–
56.7
(96.1)
1.0
–
–
(95.1)
(38.4)
14.6
(23.8)
13.3
(10.5)
Note
9
9
9
9
–
(342.2)
–
(342.2)
(2.7)
1.0
(6.4)
–
(8.1)
(350.3)
25.6
(324.7)
(24.4)
(349.1)
2021
p
25.7
(20.3)
46.0
(13.4)
(13.6)
0.3
25.7
(20.3)
46.0
(13.4)
(13.6)
0.3
l
Tota
£m
515.5
(801.0)
–
(285.5)
(98.8)
2.0
(6.4)
–
(103.2)
(388.7)
40.2
(348.5)
(11.1)
(359.6)
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
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Statement of Comprehensive Income
For the 52 weeks ended 2 October 2021
Profit/(loss) for the period
Items of other comprehensive income that may subsequently be reclassified to profit or loss
Gains/(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 income/(expense) for the period attributable to equity shareholders
Other comprehensive expense for the current and prior period relates wholly to continuing operations.
The results for the current period reflect the 52 weeks ended 2 October 2021 and the results for the prior period reflect the 53 weeks ended 3 October 2020.
2021
£m
162.8
5.9
19.7
1.7
27.3
17.5
59.1
(105.0)
(12.3)
(40.7)
(13.4)
149.4
2020
£m
(359.6)
(3.8)
21.3
(0.3)
17.2
(6.5)
–
(151.2)
17.7
(140.0)
(122.8)
(482.4)
86
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Cash Flow Statement
For the 52 weeks ended 2 October 2021
Operating activities
Profit/(loss) for the period
Taxation
Net finance costs
Depreciation and amortisation
Gain on disposal of subsidiary
Working capital movement
Non-cash movements
Increase in provisions and other non-current liabilities
Difference between defined benefit pension contributions paid and amounts charged
Income tax received/(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
Disposal of subsidiary
Movement in trade loans
Finance lease capital repayments received
Net transfer to other cash deposits
Net cash inflow from investing activities
Financing activities
Equity dividends paid
Interest paid
Swap termination costs
Proceeds from sale of own shares
Repayment of securitised debt
Repayment of bank borrowings
Capital element of lease liabilities repaid
Advance of other borrowings
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Note
2021
£m
162.8
(43.5)
66.2
42.7
(290.5)
(6.4)
100.6
2.3
(7.0)
7.5
34.7
0.5
16.2
(46.6)
228.0
0.1
1.2
(1.2)
198.2
–
(96.3)
(19.9)
0.1
(35.4)
(80.1)
(19.8)
10.0
(241.4)
(8.5)
31
31
8
30
32
30
2020
(Restated)
£m
(359.6)
(37.5)
104.1
51.6
–
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
The cash flows for the current period reflect the 52 weeks ended 2 October 2021 and the cash flows for the prior period reflect the 53 weeks ended 3 October 2020. The cash flow statement for the 53 weeks ended 3 October 2020 has
been restated such that it starts with the loss for the period rather than underlying operating profit. This restatement has had no impact on the net cash flows from operating, investing or financing activities or on the net increase in cash and
cash equivalents in the period.
87
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Balance Sheet
As at 2 October 2021
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Interests in associates
Other non-current assets
Deferred tax assets
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
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
Retirement benefit obligations
Net assets
88
Note
10
10
11
12
13
14
16
17
18
19
21
22
23
18
19
21
24
23
26
2 October
2021
£m
–
36.1
1,984.2
277.4
15.9
47.6
2,361.2
12.9
52.3
1.0
3.2
32.2
101.6
5.1
106.7
(67.5)
–
(220.7)
(1.5)
(289.7)
–
(289.7)
(1,571.8)
(170.5)
(5.5)
(9.6)
(14.4)
(1,771.8)
406.4
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)
(1,610.9)
(187.4)
(3.9)
(7.7)
(37.2)
(1,847.1)
248.9
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Balance Sheet continued
As at 2 October 2021
Shareholders’ equity
Equity share capital
Share premium account
Revaluation reserve
Merger reserve
Capital redemption reserve
Hedging reserve
Own shares
Retained earnings
Total equity
The financial statements were approved by the Board and authorised for issue on 30 November 2021 and are signed on its behalf by:
Note
28
29
29
29
2 October
2021
£m
48.7
334.0
360.5
–
6.8
(81.4)
(111.1)
(151.1)
406.4
3 October
2020
£m
48.7
334.0
430.6
23.7
6.8
(108.7)
(111.9)
(374.3)
248.9
Andrew Andrea
Chief Executive Officer
30 November 2021
89
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Statement of Changes in Equity
For the 52 weeks ended 2 October 2021
At 4 October 2020
Profit for the period
Remeasurement of retirement benefits
Tax on remeasurement of retirement benefits
Gains on cash flow hedges
Transfers to the income statement on cash flow hedges
Tax on hedging reserve movements
Property revaluation
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
Changes in equity of associates
Total transactions with owners
At 2 October 2021
Further detail in respect of the Group’s equity is provided in notes 28 and 29.
Equity
share
capital
£m
48.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48.7
Share
premium
account
£m
334.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
334.0
Revaluation
reserve
£m
430.6
–
–
–
–
–
–
59.1
(105.0)
(9.8)
(55.7)
–
–
(15.1)
0.7
–
(14.4)
360.5
Merger
reserve
£m
23.7
–
–
–
–
–
–
–
–
–
–
–
–
(23.7)
–
–
(23.7)
–
Capital
redemption
reserve
£m
6.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
Hedging
reserve
£m
(108.7)
–
–
–
5.9
19.7
1.7
–
–
–
27.3
–
–
–
–
–
–
(81.4)
Own
shares
£m
(111.9)
–
–
–
–
–
–
–
–
–
–
–
0.8
–
–
–
0.8
(111.1)
Retained
earnings
£m
(374.3)
162.8
17.5
(2.5)
–
–
–
–
–
–
177.8
1.2
(0.7)
38.8
(0.7)
6.8
45.4
(151.1)
Total
equity
£m
248.9
162.8
17.5
(2.5)
5.9
19.7
1.7
59.1
(105.0)
(9.8)
149.4
1.2
0.1
–
–
6.8
8.1
406.4
90
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Group Statement of Changes in Equity continued
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
Further detail in respect of the Group’s equity is provided in notes 28 and 29.
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
598.9
–
(29.9)
4.4
573.4
–
–
573.4
–
–
–
–
–
–
(151.2)
15.7
(135.5)
–
–
(8.1)
0.8
–
(7.3)
430.6
Merger
reserve
£m
23.7
–
–
–
23.7
–
–
23.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23.7
Capital
redemption
reserve
£m
6.8
–
–
–
6.8
–
–
6.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
Hedging
reserve
£m
(125.9)
–
–
–
(125.9)
–
–
(125.9)
–
–
–
(3.8)
21.3
(0.3)
–
–
17.2
–
–
–
–
–
–
(108.7)
Own
shares
£m
(112.0)
–
–
–
(112.0)
–
–
(112.0)
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
0.1
(111.9)
Retained
earnings
£m
36.9
3.6
(14.4)
(0.6)
25.5
(15.9)
3.0
12.6
(359.6)
(6.5)
2.0
–
–
–
–
–
(364.1)
0.4
(0.1)
8.1
(0.8)
(30.4)
(22.8)
(374.3)
Total
equity
£m
1.811
3.6
(44.3)
3.8
774.2
(15.9)
3.0
761.3
(359.6)
(6.5)
2.0
(3.8)
21.3
(0.3)
(151.2)
15.7
(482.4)
0.4
–
–
–
(30.4)
(30.0)
248.9
91
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes
For the 52 weeks ended 2 October 2021
1 Accounting policies
The Group’s principal accounting policies are set out below:
Basis of preparation
These consolidated financial statements for the 52 weeks ended 2 October 2021 (2020: 53 weeks ended 3
October 2020) have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee and Standing Interpretations Committee interpretations, adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union, and in conformity with the requirements of the Companies
Act 2006. 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.
New standards
The Group has adopted ‘Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)’ from the start
of the current period. These amendments have been applied retrospectively to hedging relationships that existed at
4 October 2020 which are directly affected by interest rate benchmark reform. These amendments also apply to the
gain or loss accumulated in the hedging reserve at 4 October 2020.
The Group has also adopted ‘Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16) from the start of the current period. The Group has applied the amendments retrospectively
and in accordance with the transition requirements has not restated comparatives for the prior periods to reflect
the application of the amendments. Since the Group had no transactions for which the benchmark rate had been
replaced with an alternative benchmark rate as at 4 October 2020, there is no impact on opening equity balances
as a result of the retrospective application. The Phase 2 amendments provide practical relief from certain requirements
in IFRS relating to modifications of financial instruments and hedging relationships triggered by the replacement of a
benchmark interest rate in a contract with a new alternative benchmark rate.
Further details are provided below and in note 25.
1 Accounting policies (continued)
IFRS 4
Insurance Contracts
Amendments regarding the expiry date of the deferral approach
IFRS 10 Consolidated Financial Statements
IFRS 17
IAS 1
IAS 8
IAS 12
IAS 16
IAS 28
IAS 37
Amendments regarding the sale or contribution of assets between an investor and its
associate or joint venture
Insurance Contracts
New accounting standard
Presentation of Financial Statements
Amendments regarding the classification of liabilities
Amendments regarding the disclosure of accounting policies
Accounting Policies, Changes in Accounting Estimates and Errors
Amendments regarding the definition of accounting estimates
Income Taxes
Amendments regarding deferred tax on leases and decommissioning obligations
Property, Plant and Equipment
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
Investments in Associates and Joint Ventures
Amendments regarding the sale or contribution of assets between an investor and
its associate or joint venture
Provisions, Contingent Liabilities and Contingent Assets
Amendments regarding the costs to include when assessing whether a contract
is onerous
1 January 2023
Date deferred
1 January 2023
1 January 2023
1 January 2023
1 January 2023
1 January 2023
1 January 2022
Date deferred
1 January 2022
A number of other new standards are also effective from the start of the current period but they do not have a material
effect on the Group’s financial statements.
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.
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.
Going concern
The impact of COVID-19 on the economy and the hospitality industry has resulted in lower revenues, profit and
operating cash flow since March 2020 and has 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, although the hospitality
industry has now reopened in full, there is still uncertainty as to whether any restrictions, such as social distancing
measures, will be reintroduced or whether any further local or national lockdowns will be required.
The Group’s sources of funding include its securitised debt, a £280.0 million bank facility available until 2024, of
which £190.0 million was drawn at 2 October 2021, and a £40.0 million private placement available until 2024.
92
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
1 Accounting policies (continued)
There are two covenants associated with the Group’s securitised debt. The FCF DSCR is a measure of free cash
flow to debt service for the group headed by Marston’s Pubs Parent Limited, and is required to be a minimum of 1.1
over both a two-quarter and four-quarter period, and the Net Worth is derived from the net assets of that group of
companies. The Group has secured waivers from its bondholders in respect of the FCF DSCR Covenant up to and
including 2 October 2021 for the two-quarter test and up to and including 1 January 2022 for the four-quarter test.
There was headroom of £345.5 million on the Net Worth Covenant at 2 October 2021.
There are two covenants associated with the Group’s bank and private placement borrowings. The Debt Cover
covenant is a measure of net borrowings to EBITDA (a maximum of 3.5 times) for the non-securitised group of
companies and the Interest Cover covenant is a measure of EBITDA to finance charges (a minimum of 2 times from
2 April 2022, rising to 2.5 times from 1 October 2022, and further rising to 3 times from 1 April 2023) for that group
of companies. The Group has agreed with its bank and private placement lenders to replace these existing financial
covenant tests with a series of absolute covenants in respect of net borrowings and EBITDA for each quarter up to
and including 1 January 2022. The headroom on the net borrowings and EBITDA covenants with the banks and
private placement lenders at 2 October 2021 was £32.1 million and £9.2 million respectively.
The Directors have performed an assessment of going concern over the period of 12 months from the date of signing
these financial statements, 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 and costs will continue at levels experienced in recent months,
rising broadly in line with inflation. Deferred VAT will be repaid on its due date and the expected increase in the VAT
rate from 12.5% to 20% in April 2022 will be absorbed by the Group. There is a forecast breach in both the Debt
Cover and Interest Cover bank and private placement covenants at 2 April 2022.
The Directors have also considered a severe but plausible downside scenario, incorporating further lockdowns at a
national level in January and February 2022, which would have the effect of substantially reducing sales, profit and
operating cash flow. It has been assumed that there is no access to government support measures such as furlough
payments in this scenario, and certain mitigating actions within management’s control have been assumed, such as
the deferral of uncommitted capital expenditure. 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. However, the Debt
Cover and Interest Cover bank and private placement covenants and the FCF DSCR Covenant for the securitisation
are all forecast to be breached at 2 April 2022.
As the forecasts indicate that covenants are expected to be breached within the next 12 months, the Directors
have concluded that a material uncertainty over going concern exists. The Group will continue to have regular
communication with its lenders throughout this period and on the basis of the previous waivers secured and the
return to pre-pandemic levels of trading in recent months the Directors expect to be able to secure the future
waivers required.
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 the required covenant waivers or amendments, 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 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.
When the Group loses control of a subsidiary the carrying amounts of the assets and liabilities of that subsidiary are
derecognised at the date when control is lost. The fair value of the consideration received is recognised alongside
any investment retained in the former subsidiary at the date that control is lost. Any resulting difference is recognised in
full as a gain or loss under IFRS 10 ‘Consolidated Financial Statements’.
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, and hence for the purpose of the consolidated financial statements they have been treated as
subsidiary undertakings.
The Group’s interests in associates are accounted for using the equity method. On initial recognition the investment in
an associate is recognised at cost and the carrying amount is subsequently increased or decreased to recognise the
Group’s share of the profit or loss, other comprehensive income and changes in equity of the associate after the date
of acquisition. The net investment in an associate is impaired and impairment losses are incurred if, and only if, there
is objective evidence of impairment as a result of events that occurred after the initial recognition of the net investment
which have an impact on the estimated future cash flows that can be reliably estimated.
93
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
1 Accounting policies (continued)
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 – continuing
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.
Contract services – discontinued
The Group brewed and packaged drinks for customers. Revenue was recognised when the Group had transferred
control of the goods to the customer. This occurred when the goods had been delivered to the customer, the customer
had obtained legal title to the goods and the customer had an unconditional obligation to pay for the goods.
The Group also transported and delivered goods for customers. Revenue was recognised over time as the Group
transported the goods; due to the short distances the goods were transported this was equivalent to recognising
revenue at the point when the goods were delivered to the required location.
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.
In respect of its franchised arrangements, where the Group controls the above goods or services before those goods
or services are transferred to the customer, the associated income is included within the Group’s revenue.
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.
Wholesale sales – continuing
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.
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.
The Group’s revenue from contracts with customers in respect of discontinued operations comprised wholesale sales
and contract services.
Wholesale sales – discontinued
The Group sold drinks to wholesalers, retailers and other pub operators. Revenue was recognised when the Group
had transferred control of the goods to the customer. This occurred when the goods had been delivered to the
customer, the customer had obtained legal title to the goods, the Group could not require the return or transfer of the
goods and the customer had an unconditional obligation to pay for the goods.
Drinks were often sold with retrospective volume discounts based on sales over a defined period. The anticipated
discounts were estimated based on accumulated experience using the expected value method and were deducted
from the sales price that was recognised in revenue. A refund liability was 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.
Other operating income mainly comprises amounts receivable under the Coronavirus Job Retention Scheme and
COVID-19 assistance grants from local authorities. These are recognised in the period to which they relate.
Operating segments
In the prior period the Group had three distinguishable operating segments being Pubs and Bars, Brewing and Group
Services. Following the disposal of the Group’s brewing operations in October 2020, the Group is considered to have
one operating segment under IFRS 8 ‘Operating Segments’ and no disclosures are presented. This is in line with the
reporting to the chief operating decision maker and the operational structure of the business. For the purposes of IFRS 8
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. Material judgements in respect of the classification of non-underlying items in the current period related
to the impairment of freehold and leasehold properties and the contingent consideration fair value movement.
The impairment of freehold and leasehold properties was considered to be non-underlying as it was a significant
item that resulted primarily from movements in external market variables rather than reflecting the underlying trading
performance of the Group. The contingent consideration fair value movement was considered to be non-underlying
due to its non-recurring nature and this balance being solely derived from external market movements.
94
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
1 Accounting policies (continued)
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 5 to 20 years
Development costs 10 years
Indefinite
Life of the lease
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 in the prior period, goodwill was allocated to cash generating units that were
consistent with the Group’s operating segments.
Property, plant and equipment
• Land and buildings which are either freehold or are in substance freehold assets are classed as effective freehold
land and buildings. 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. All other leasehold land and buildings are classed as leasehold land and buildings.
• 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 15 years.
• Own labour and interest costs directly attributable to capital projects are capitalised.
95
Residual values and useful lives are reviewed and adjusted if appropriate at each balance sheet date. The Group’s
effective freehold land and buildings in respect of its pub estate are considered to have a residual value equal to their
current valuation and as such no depreciation is charged on these assets.
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. Substantially all 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 effective freehold 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. 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 had an indefinite life, the recoverable amount was assessed annually
and an impairment loss was recognised for the amount by which the asset’s carrying amount exceeded its
recoverable amount.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
1 Accounting policies (continued)
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.
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 lease term is determined as the non-cancellable period of a lease together with periods covered by an option to
extend the lease if the Group is reasonably certain to exercise that option and the periods covered by an option to
terminate the lease if the Group is reasonably certain not to exercise that option.
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.
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.
Obligations arising from sale and leaseback arrangements with repurchase options that do not fall within the
scope of IFRS 16 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 and are valued on a ‘first in, first out’ basis.
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 proft 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. Contingent consideration is also categorised as at fair value through profit or loss as it
does 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.
96
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
1 Accounting policies (continued)
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 fnancial liabilities
Non-derivative financial liabilities are classified as other financial liabilities. The Group’s other financial liabilities
comprise borrowings, trade payables and other payables. Other financial liabilities are carried at amortised cost
using the effective interest method.
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have
been transferred and the Group has transferred substantially all risks and rewards of ownership.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall
be undertaken.
Derivative fnancial 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.
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.
For the purpose of evaluating whether there is an economic relationship between the hedged item and the hedging
instrument, the Group assumes that the benchmark interest rate is not altered as a result of interest rate benchmark
reform. For a cash flow hedge of a forecast transaction and the purpose of assessing whether the forecast transaction
is highly probable, the Group assumes that the benchmark interest rate will not be altered as a result of interest rate
benchmark reform. In determining whether a previously designated forecast transaction in a discontinued cash flow
hedge is still expected to occur, the Group assumes that the interest rate benchmark cash flows designated as a
hedge will not be altered as a result of interest rate benchmark reform.
97
The Group ceases to apply these specific policies for assessing the economic relationship between the hedged
item and the hedging instrument and undertaking its highly probable assessment of the forecast cash flows when
the uncertainty arising from interest rate benchmark reform regarding the timing and the amount of the interest rate
benchmark based cash flows is no longer present, or when the hedging relationship is discontinued.
When the basis for determining the contractual cash flows of the hedged item or hedging instrument changes as a
result of IBOR reform and therefore there is no longer uncertainty arising about the cash flows of the hedged item or
the hedging instrument, the Group amends the formal designation of that hedging relationship to reflect the changes
required by IBOR reform. For this purpose the hedge designation is amended only to designate an alternative
benchmark rate as the hedged risk, to update the description of the hedged item or to update the description of the
hedging instrument. Such an amendment to the formal designation of a hedging relationship does not constitute the
discontinuation of the hedging relationship or the designation of a new hedging relationship.
When the interest rate benchmark on which the hedged future cash flows had been based is changed as required by
IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Group
deems that the amount accumulated in the hedging reserve for that hedging relationship is based on the alternative
benchmark rate on which the hedged future cash flows will be based.
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.
Contingent consideration
Contingent consideration is initially recognised at fair value at the date of disposal and subsequently remeasured at
its fair value at each balance sheet date.
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.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
1 Accounting policies (continued)
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 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 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.
If the basis for determining the contractual cash flows of borrowings measured at amortised cost changes as a result
of interest rate benchmark reform, then the effective interest rate of the borrowings is updated to reflect the change
that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest
rate benchmark reform when the change is necessary as a direct consequence of the reform and the new basis for
determining the contractual cash flows is economically equivalent to the previous basis.
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.
98
Trade payables and other payables
Trade payables and other payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.
Employee benefts
Pension costs for the Group’s 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.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
1 Accounting policies (continued)
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 (excluding rent) are also recognised as provisions.
These provisions are measured at the present value of the expenditure expected to be required to settle the obligation
using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
obligation for which the estimates of future cash flows have not been adjusted. The key assumptions used in the
discounted cash flow calculations are the discount and inflation rates and the expected future net 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.
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 signifcant judgements
Under IFRS the Group is required 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, 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 11).
Retirement benefts
• 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 26).
Financial instruments
• Valuation of derivative financial instruments (note 25).
99
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
2 Segment reporting
3 Revenue and operating expenses (continued)
The amounts included in the line items above which have been classified as non-underlying are as follows:
Raw materials and consumables
Employee costs
Impairment of freehold and leasehold properties
Impairment of goodwill
Other operating charges
Underlying EBITDA
Operating loss
Non-underlying operating items
Underlying operating (loss)/profit
Depreciation and amortisation
Fees payable to the Company’s Auditor were as follows:
KPMG LLP fees:
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
2021
£m
0.1
1.7
83.5
–
10.9
96.2
2021
£m
(105.0)
97.6
(7.4)
42.7
35.3
2021
£m
0.2
0.2
0.1
0.5
2020
£m
3.9
2.0
105.1
200.6
30.6
342.2
2020
£m
(293.0)
367.0
74.0
51.6
125.6
2020
£m
0.3
0.2
0.1
0.6
In the prior period the Group had three distinguishable operating segments being Pubs and Bars, Brewing and
Group Services. Following the disposal of the Group’s brewing operations in October 2020, the Group is
considered to have one operating segment under IFRS 8 ‘Operating Segments’ and no disclosures are presented.
This is in line with the reporting to the chief operating decision maker and the operational structure of the business.
The measure of profit or loss reviewed by the chief operating decision maker is underlying profit/loss before tax for
the total of continuing and discontinued operations.
Geographical areas
Revenue generated outside the UK during the period was £0.9 million (2020: £11.0 million). This relates wholly to
discontinued operations. 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
Own work capitalised
Other operating income
Raw materials and consumables
Depreciation of property, plant and equipment
Amortisation of intangible assets
Employee costs
Hire of plant and machinery
Impairment of freehold and leasehold properties
Impairment of goodwill
Other operating charges
Operating expenses for continuing operations
2021
£m
376.3
20.4
396.7
5.0
401.7
2021
£m
(2.1)
(0.8)
(58.2)
105.6
38.9
3.8
183.9
1.2
83.5
–
136.4
492.2
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
Government grants of £43.5 million (2020: £33.3 million) in respect of the Coronavirus Job Retention Scheme and
£10.9 million (2020: £0.8 million) in respect of COVID-19 assistance from local authorities are included within other
operating income from continuing operations.
Other operating charges primarily relate to pub overheads and administration costs.
100
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
4 Non-underlying items
4 Non-underlying items (continued)
Non-underlying operating items
Reorganisation and restructuring costs
Impairment of freehold and leasehold properties
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
Interest on VAT claims
COVID-19 financing costs
Interest rate swap movements
Contingent consideration fair value movement
Total non-underlying items for continuing operations
2021
£m
1.0
83.9
–
0.5
–
–
10.8
–
96.2
0.6
–
1.4
(8.4)
(20.0)
(26.4)
69.8
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
Reorganisation and restructuring costs
Following the disposal of the Group’s brewing business, and in light of the ongoing impact of the COVID-19
outbreak, the Group undertook a central restructuring exercise in the current period as part of a full review of its
overhead costs.
Impairment of freehold and leasehold properties
At 4 July 2021 the Group’s effective freehold properties were revalued by independent chartered surveyors on
an open market value basis. The Group also undertook an impairment review of its leasehold properties in the
current period.
In the prior period, in light of the COVID-19 outbreak, the Group undertook a detailed valuation review of its pub
estate, which resulted in the impairment of a number of these properties.
The revaluation and impairment adjustments in respect of the above were recognised in the revaluation reserve or
income statement as appropriate. The amount recognised in the income statement comprises:
Impairment of property, plant and equipment (note 11)
Reversal of past impairment of property, plant and equipment (note 11)
Impairment of assets held for sale (note 18)
Valuation fees
2021
£m
104.0
(22.3)
1.8
0.4
83.9
2020
£m
105.1
–
–
–
105.1
Past service cost in respect of Guaranteed Minimum Pension equalisation
On 26 October 2018 a High Court ruling indicated that Guaranteed Minimum Pensions must be equalised for men
and women. 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 additional requirement has been reflected in the calculation of the Group’s net defined benefit asset/
liability in the current period and the resulting additional past service cost of £0.5 million has been classified as a
non-underlying item.
Impact of COVID-19
In order to mitigate the spread of COVID-19 the UK government implemented various operating restrictions in the
hospitality industry, such as pub closures, reduced opening times and social distancing measures. These had a
significant impact on the Group’s business and its customers. Certain associated costs/charges, which primarily
comprise bad debt and lease related provisions, contract penalties and stock write-offs, have been classified as a
non-underlying item in the current and prior period. Details of government grants received in respect of COVID-19
are provided in note 3.
Net interest on net defned beneft 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 (2020: £0.6 million) (note 26).
COVID-19 fnancing costs
As a result of the COVID-19 outbreak and the consequential impact on its trading ability, the Group obtained certain
waivers from its lenders, primarily in respect of covenants. In the prior period the Group also obtained additional
financing facilities from its lenders. The costs related to this have been classified as a non-underlying item in the current
and prior period.
101
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
4 Non-underlying items (continued)
4 Non-underlying items (continued)
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 gain of £5.9 million (2020: loss of £3.8 million) has been
recognised in the hedging reserve in respect of the effective portion of the fair value movement and £7.2 million
(2020: £6.7 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 £1.6 million (2020: £1.7 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 loss of £0.8 million
(2020: gain of £0.5 million), has been recognised within non-underlying items. In addition £12.5 million
(2020: £14.6 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 cash paid of £11.6 million (2020: £11.4 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 fair value movement, a gain of £24.0 million (2020: £7.7 million), equal to the
change in the carrying value of the interest rate swaps in the period has been recognised within non-underlying items.
The Group terminated one of its interest rate swaps in the current period resulting in a loss of £2.3 million which has
been recognised within non-underlying items.
Contingent consideration fair value movement
The contingent consideration on the disposal of Marston’s Beer Company Limited was initially recognised at
its fair value at the date of disposal and has been subsequently remeasured at its fair value at 2 October 2021.
The movement in fair value has been recognised within non-underlying items.
Impact of taxation
The current tax credit relating to the above non-underlying items amounts to £nil (2020: £3.2 million). The deferred
tax credit relating to the above non-underlying items amounts to £7.9 million (2020: £20.6 million). In addition,
there is a non-underlying deferred tax credit of £19.8 million (2020: £1.8 million) in relation to the change in
corporation tax rate.
Prior period non-underlying items
In the 52 weeks ended 28 September 2019 the Group decided to focus its capital expenditure upon its existing
estate and as such acquisition and development costs of £0.9 million in respect of sites which the Group no longer
intended to acquire and/or develop were written off in the prior period.
In the prior period the Group fully impaired the goodwill that was allocated to the Pubs and Bars segment (note 10).
The inputs to the value in use calculation were significantly impacted by the COVID-19 outbreak.
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 prior period. The net loss on disposal and associated costs were
classified as a non-underlying item, together with dilapidations costs from a previous portfolio disposal.
In the prior period the Group recognised a net credit of £3.2 million in respect of VAT claims, along with the
associated interest of £1.0 million. This comprised 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.
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
2021
£m
166.5
13.4
6.6
1.2
1.2
188.9
(5.0)
183.9
2020
£m
205.2
16.6
9.9
0.4
0.4
232.5
(58.1)
174.4
A non-underlying charge of £1.7 million (2020: £2.0 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
Termination benefits
Share-based payments
2021
Number
9,578
1,511
2020
Number
10,392
2,924
2021
£m
1.6
0.1
0.4
2.1
2020
£m
1.4
–
0.1
1.5
102
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
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
COVID-19 financing costs
Total finance costs
Finance income
Finance lease and other interest receivable
Non-underlying finance income
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
Loss on termination of interest rate swaps
2021
£m
11.0
37.4
17.7
21.1
6.2
93.4
0.6
1.4
2.0
95.4
(0.9)
(0.9)
–
–
(0.9)
0.8
(24.0)
12.5
2.3
(8.4)
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
Contingent consideration fair value movement
Contingent consideration fair value movement
Net finance costs for continuing operations
(20.0)
(20.0)
66.1
–
–
103.2
103
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 charge/(credit) reported in the statement of comprehensive income
2021
£m
–
(0.5)
–
(0.5)
(14.6)
–
(7.9)
(19.8)
(42.3)
(42.8)
2021
£m
2.5
9.8
(1.7)
10.6
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 £8.4 million (2020: £5.0 million) relating to the change in corporation tax rate has been
recognised in the statement of comprehensive income and is included in the above amounts.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
7 Taxation (continued)
8 Discontinued operations
The actual tax rate for the period is higher (2020: lower) than the standard rate of corporation tax of 19%
(2020:19%). The differences are explained below:
Tax reconciliation
Loss before tax from continuing operations
Loss before tax multiplied by the corporation tax rate of 19% (2020: 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
Share of loss of associate
Impairment of goodwill
Other amounts requiring adjustment for tax purposes
Impact of change in tax rate
Taxation credit for continuing operations
2021
£m
(171.1)
2020
£m
(388.7)
(32.5)
(73.9)
(0.5)
9.0
(2.6)
0.8
2.8
–
–
(19.8)
(42.8)
(7.4)
4.9
(0.1)
0.6
–
38.1
(0.6)
(1.8)
(40.2)
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. The March 2021 Budget
announced that the main rate of corporation tax would change from 19% to 25% with effect from 1 April 2023.
This change was substantively enacted on 24 May 2021. This will increase the Group’s future current tax charge
accordingly. The deferred tax assets and liabilities at 2 October 2021 have been calculated at 25% (2020: 19%).
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 a cash receipt of £232.4 million, contingent consideration of up to
£34.0 million and a 40% shareholding in Carlsberg Marston’s Brewing Company Limited.
Results of discontinued operations
Revenue
Operating expenses
Operating profit/(loss)
Net finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) after taxation
Gain on disposal of
discontinued operations
Profit/(loss) for the
period attributable to
equity shareholders
2021
Non-
underlying
£m
–
(1.4)
(1.4)
–
(1.4)
0.3
(1.1)
Underlying
£m
22.1
(20.7)
1.4
(0.1)
1.3
0.4
1.7
Total
£m
22.1
(22.1)
–
(0.1)
(0.1)
0.7
0.6
Underlying
£m
305.5
(288.2)
17.3
(0.9)
16.4
(3.1)
13.3
2020
Non-
underlying
£m
–
(24.8)
(24.8)
–
(24.8)
0.4
(24.4)
l
Tota
£m
305.5
(313.0)
(7.5)
(0.9)
(8.4)
(2.7)
(11.1)
–
290.5
290.5
–
–
–
1.7
289.4
291.1
13.3
(24.4)
(11.1)
Non-underlying operating items in the current period relate to the impact of COVID-19 and business separation
costs. Non-underlying operating items in the prior period related to the impact of COVID-19, disposal costs and
the impairment of central assets associated with discontinued operations. Government grants of £0.1 million (2020:
£6.4 million) in respect of the Coronavirus Job Retention Scheme are included within operating expenses for
discontinued operations.
Cash fows from discontinued operations
Net cash (outflow)/inflow from operating activities
Net cash inflow/(outflow) from investing activities
Net cash outflow from financing activities
Net increase in cash and cash equivalents
2021
£m
(86.8)
227.7
(0.2)
140.7
2020
£m
63.2
(7.5)
(4.1)
51.6
104
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
8 Discontinued operations (continued)
Disposal of discontinued operations
Consideration received in cash (net of disposal costs)
Shares in Carlsberg Marston’s Brewing Company Limited
Balance owed by Marston’s Beer Company Limited at completion
Contingent consideration
Total consideration
Goodwill
Other intangible assets
Property, plant and equipment
Trade loans
Inventories
Trade and other receivables
Cash and cash equivalents
Borrowings
Trade and other payables
Deferred tax liabilities
Net assets disposed of
Gain on disposal of discontinued operations
Consideration received in cash (net of disposal costs)
Cash and cash equivalents disposed of
Net cash inflow on disposal
9 Earnings per ordinary share
2021
£m
228.1
285.1
55.5
8.9
577.6
29.7
62.1
157.6
8.0
28.5
56.8
0.1
(21.1)
(20.8)
(13.8)
287.1
290.5
2021
£m
228.1
(0.1)
228.0
Basic earnings/(loss) 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 (note 29).
For diluted earnings/(loss) 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.
105
9 Earnings per ordinary share (continued)
Underlying (loss)/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.
2021
2020
Basic earnings/(loss) per share
Total
Continuing
Discontinued
Diluted earnings/(loss) 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
162.8
(128.3)
291.1
162.8
(128.3)
291.1
(84.5)
(86.2)
1.7
(84.5)
(86.2)
1.7
Per share
amount
p
25.7
(20.3)
46.0
25.7
(20.3)
46.0
(13.4)
(13.6)
0.3
(13.4)
(13.6)
0.3
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
2021
m
632.8
–
632.8
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
2020
m
632.7
–
632.7
In accordance with IAS 33 ‘Earnings per Share’ the potential ordinary shares are not dilutive as their inclusion would
reduce the loss per share for continuing operations.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
10 Goodwill and other intangible assets
10 Goodwill and other intangible assets (continued)
Goodwill
Cost
At 4 October 2020 and 2 October 2021
Aggregate impairment
At 4 October 2020 and 2 October 2021
Net book amount at 3 October 2020
Net book amount at 2 October 2021
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
£m
201.7
201.7
–
–
£m
231.4
(29.7)
201.7
1.1
200.6
201.7
230.3
–
Impairment testing of goodwill
In the prior period goodwill was allocated to cash generating units which comprised the Group’s operating
segments, and the value of the recoverable amounts allocated to those segments was estimated and compared to
the carrying amounts. Recoverable amounts were determined based on the higher of value in use and fair value less
costs to sell.
Goodwill was allocated to operating segments based on the extent to which the benefits of acquisitions flowed
to that segment. The goodwill allocated to the Brewing segment was transferred to assets held for sale in the
prior period.
106
The key assumptions used in determining value in use were the cash flow projections, which were 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% and the growth rate used to extrapolate the cash flows beyond the five-year projections of 1.5%.
Other commercial assumptions related to market growth, market share and net selling prices. These assumptions were
based on historic trends adjusted for management estimates of future prospects. These estimates 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.
The above impairment tests required an impairment of £200.6 million in the prior period reducing the balance
of goodwill to £nil. This impairment charge was included within non-underlying operating expenses (note 4).
The impairment related to the Pubs and Bars segment which had 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.
Other intangible assets
Cost
At 4 October 2020
Additions
Net transfers to assets held for sale and disposals
At 2 October 2021
Amortisation
At 4 October 2020
Charge for the period
Net transfers to assets held for sale and disposals
At 2 October 2021
Net book amount at 3 October 2020
Net book amount at 2 October 2021
Computer
software
£m
41.6
7.5
(0.7)
48.4
9.1
3.8
(0.6)
12.3
32.5
36.1
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
10 Goodwill and other intangible assets (continued)
11 Property, plant and equipment
Acquired
brands
£m
Lease
premiums
£m
Computer
software
£m
Development
costs
£m
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
62.1
–
–
(62.1)
–
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
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)
–
–
–
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 were 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 were regarded as having
indefinite useful lives and no annual amortisation was provided. In the prior 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.
Lease premiums classified as intangible assets were those acquired with new subsidiaries.
Cost or valuation
At 4 October 2020
Additions
Disposals
Net transfers to assets held for sale
Revaluation
At 2 October 2021
Depreciation
At 4 October 2020
Charge for the period
Disposals
Net transfers to assets held for sale
Impairment
At 2 October 2021
Effective
freehold
land and
buildings
£m
1,625.6
20.2
(12.7)
(2.6)
(100.5)
1,530.0
0.1
0.1
(0.1)
–
–
0.1
Leasehold
land and
buildings
£m
392.0
96.1
(5.2)
–
–
482.9
121.3
13.6
(4.7)
–
27.0
157.2
Fixtures,
fittings,
tools and
equipment
£m
Plant and
machinery
£m
0.1
–
(0.1)
–
–
–
0.1
–
(0.1)
–
–
–
278.7
12.3
(19.5)
(0.3)
–
271.2
136.6
25.2
(19.1)
(0.2)
0.1
142.6
Total
£m
2,296.4
128.6
(37.5)
(2.9)
(100.5)
2,284.1
258.1
38.9
(24.0)
(0.2)
27.1
299.9
Net book amount at 3 October 2020
Net book amount at 2 October 2021
1,625.5
1,529.9
270.7
325.7
–
–
142.1
128.6
2,038.3
1,984.2
107
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
11 Property, plant and equipment (continued)
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
Disposals
Net transfers to assets held for sale
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
Disposals
Net transfers to assets held for sale
Impairment
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
2,004.4
–
2,004.4
–
22.6
(81.8)
(75.7)
(243.9)
1,625.6
0.8
–
0.8
–
0.4
–
(1.1)
–
0.1
Leasehold
land and
buildings
£m
110.2
(19.0)
91.2
315.2
5.6
(7.9)
(12.1)
–
392.0
5.1
25.3
30.4
71.1
12.7
(4.7)
(2.0)
13.8
121.3
Fixtures,
fittings,
tools and
equipment
£m
Plant and
machinery
£m
86.6
–
86.6
1.2
3.4
(4.1)
(87.0)
–
0.1
35.7
–
35.7
0.8
5.5
(3.8)
(38.1)
–
0.1
333.6
–
333.6
0.4
19.0
(25.5)
(48.8)
–
278.7
142.8
–
142.8
0.3
30.0
(18.1)
(21.1)
2.7
136.6
Total
£m
2,534.8
(19.0)
2,515.8
316.8
50.6
(119.3)
(223.6)
(243.9)
2,296.4
184.4
25.3
209.7
72.2
48.6
(26.6)
(62.3)
16.5
258.1
2,003.6
1,625.5
60.8
270.7
50.9
–
190.8
142.1
2,306.1
2,038.3
11 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
2021
£m
1,395.2
2020
£m
1,469.5
134.7
156.0
325.7
1,855.6
270.7
1,896.2
If the effective freehold land and buildings had not been revalued, the historical cost net book amount would be
£1,102.3 million (2020: £1,147.4 million).
Cost at 2 October 2021 includes £3.1 million (2020: £6.4 million) of assets in the course of construction.
Interest costs of £nil (2020: £0.3 million) were capitalised in the period in respect of the financing of major projects.
The capitalisation rate used was 5%.
The net loss on disposal of property, plant and equipment, intangible assets and properties classified as held for sale
was £1.1 million (2020: £20.8 million).
Capital expenditure authorised and committed at the period end but not provided for in the financial statements was
£2.7 million (2020: £2.3 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’ was £230.3 million (2020: £269.0 million).
In the current period the Group entered into a transaction with S.A.Brain & Company,Limited which resulted in the
Group operating an additional 147 pubs. As the Group did not take on any pre-existing business processes the
transaction was not accounted for as a business combination under IFRS 3 ‘Business Combinations’. For properties
where the Group entered into a lease, right-of-use assets of £90.5 million were recognised within additions above,
and the associated lease liabilities were recognised within borrowings, and for the eight properties where the Group
acquired the freehold the purchase price was recognised within additions above. It is considered that the Group acts
as principal in regards to these pub businesses and as such the income from the retail sales, wholesale sales and
leasing of these businesses is included within the Group’s revenue. The Group agreed to operate ten pubs under a
short-term management agreement in return for a management fee. It is considered that the Group is acting as agent
in respect of these properties and as such the Group does not recognise any revenue in respect thereof; instead it
recognises the management fee income within other operating income.
108
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
11 Property, plant and equipment (continued)
11 Property, plant and equipment (continued)
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
248.3
(0.1)
248.2
Leased to
tenants
£m
25.2
(6.7)
18.5
2021
Used by
the Group
£m
1,281.7
–
1,281.7
2021
Used by
the Group
£m
457.7
(150.5)
307.2
Total
£m
1,530.0
(0.1)
1,529.9
Total
£m
482.9
(157.2)
325.7
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
l
Tota
£m
1,625.6
(0.1)
1,625.5
l
Tota
£m
392.0
(121.3)
270.7
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 tables below show 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
2021
Level 1
£m
–
Level 2
£m
–
Level 3
£m
1,529.9
Total
£m
1,529.9
2020
l
Leve 1
£m
–
l
Leve 2
£m
1,625.5
l
Leve 3
£m
–
Total
£m
1,625.5
The services provided to the tenants are considered to be significant to the arrangement as a whole such that the
properties do not qualify as investment properties under IAS 40 ‘Investment Property’.
Recurring fair value measurements
Effective freehold land and buildings
Revaluation/impairment
At 4 July 2021 independent chartered surveyors revalued the Group’s effective freehold properties on an open
market value basis. During the current and prior period various assets were also 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
109
2021
£m
2020
£m
(104.0)
22.3
(81.7)
59.1
(105.0)
(45.9)
(127.6)
(109.2)
–
(109.2)
–
(151.2)
(151.2)
(260.4)
At 3 October 2020 the fair values of the effective freehold land and buildings were considered to fall within Level
2 of the fair value hierarchy. These fair values were 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 multiple applied,
it was considered that the most significant input related to the multiple which, being indirectly observable, is a Level 2
input. Thus it was concluded that since the most significant influence on the valuation was observable indirectly
Level 2 was the most appropriate categorisation for these fair value measurements.
At 2 October 2021 it was considered that the unobservable Level 3 input for the fair maintainable trade was now
also a significant input to the valuation and as such Level 3 was the most appropriate categorisation for these fair
value measurements.
A reasonably possible increase of 10% in the multiple would increase the fair value by £163.1 million and a
reasonably possible decrease of 10% in the multiple would decrease the fair value by £163.1 million.
A reasonably possible increase of 4% in the fair maintainable trade would increase the fair value by £65.2 million
and a reasonably possible decrease of 4% in the fair maintainable trade would decrease the fair value by
£65.2 million. These are based on the top ends of observable multiples achieved in the market and historic
movements in the average fair maintainable trade.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
11 Property, plant and equipment (continued)
12 Interests in associates
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 4 July 2021. 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.
Level 3 recurring fair value measurements
At beginning of the period
Additions
Transfers
Disposals
Net transfers to assets held for sale
Revaluation gains and losses recognised in profit or loss
Revaluation gains and losses recognised in other comprehensive income
Depreciation charge for the period
At end of the period
2021
£m
–
20.2
1,625.5
(12.6)
(2.6)
(54.6)
(45.9)
(0.1)
1,529.9
Revaluation gains and losses recognised in profit or loss in respect of Level 3 recurring fair value measurements are
included within operating expenses in the income statement and comprise net unrealised losses of £54.4 million and
net realised losses of £0.2 million.
Impairment testing of leasehold properties
Leasehold properties, comprising leasehold land and buildings and associated fixtures, fittings, tools and equipment
and computer software, are held under the cost model. These properties were reviewed for impairment in the current
and prior period by comparing the recoverable amount of each property to the carrying amount of the assets.
Recoverable amount is the higher of value in use and fair value less costs to sell. The resulting impairments primarily
related to properties with poor trading performance. The key assumptions used in the value in use calculations were
the future trading cash flows of the properties, a pre-tax discount rate of 9.4% (2020: 8.4%) and a long-term growth
rate of 1.5% (2020: 1.5%).
Changes in these key assumptions could impact the impairment charge recognised for these assets. The future trading
cash flows used in the value in use calculations are property level EBITDA forecasts. If the forecast EBITDAs were to
decline by 4.0% then there would be a £2.6 million increase in the impairment recognised. If the pre-tax discount
rate were to increase by 2.0% it would increase the impairment by £9.5 million. If the long-term growth rate were to
decrease by 0.5% it would increase the impairment by £2.9 million.
110
On 30 October 2020 the Group acquired a 40% interest in Carlsberg Marston’s Brewing Company Limited, from
which date it has been the sole supplier of drinks to the Group. The principal place of business of Carlsberg Marston’s
Brewing Company Limited is the UK.
The tables below summarise the financial information of Carlsberg Marston’s Brewing Company Limited as included
in its own financial statements for the period from 30 October 2020 to 30 September 2021, adjusting for fair value
adjustments at acquisition and differences in accounting policies.
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Group’s share of net assets (40%)
Goodwill
Elimination of unrealised profit on upstream sales
Carrying amount of interest in associate
Revenue
Loss from continuing operations
Other comprehensive income
Total comprehensive expense
Group’s share of loss from continuing operations (40%)
Elimination of unrealised profit on upstream sales
Loss from associates recognised in the income statement
Group’s share of other comprehensive income (40%)
Group’s share of total comprehensive expense
2021
£m
264.2
312.5
(340.1)
(45.8)
190.8
76.3
201.7
(0.6)
277.4
2021
£m
628.6
(34.8)
–
(34.8)
(13.9)
(0.6)
(14.5)
–
(14.5)
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
12 Interests in associates (continued)
14 Deferred tax
Details of related party transactions with Carlsberg Marston’s Brewing Company Limited are as follows:
Purchase of goods
Rendering of services
Settlement of liabilities on behalf on associate
Receipt of cash on behalf of associate
Transaction
amount
2021
£m
(84.4)
4.3
281.3
(437.7)
Balance
outstanding
2021
£m
(42.4)
0.5
78.3
(62.7)
There is a transitional services agreement in place between the Group and Carlsberg Marston’s Brewing Company
Limited whereby the transactions for Marston’s Beer Company Limited continue to be processed through the Group’s
systems and bank accounts.
All outstanding balances are to be settled in cash within six months and are unsecured.
Carlsberg Marston’s Brewing Company Limited operates in a sector that has been disproportionately impacted by
COVID-19. The loss from continuing operations of £34.8 million was considered an indicator of impairment of this
investment and as such an impairment review was undertaken under IAS 36 ‘Impairment of Assets’. The recoverable
amount was estimated on a value in use basis. This was based on forecast cash flows approved by the board of
Carlsberg Marston’s Brewing Company Limited and used a discount rate of 6.5%. The impairment review indicated
there was significant headroom over the carrying amount. No reasonably possible change in the assumptions used
would have resulted in an impairment.
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
(Credited)/charged to the income statement:
Continuing operations
Discontinued operations
Charged/(credited) to equity:
Impairment and revaluation of properties
Hedging reserve
Retirement benefits
Classified as held for sale and disposals
At end of the period
13 Other non-current assets
Finance lease receivables
Recognised in the balance sheet
Deferred tax liabilities (after offsetting)
Deferred tax assets (after offsetting)
2021
£m
15.9
2020
£m
17.5
Further detail regarding the impairment of finance lease receivables is provided in note 25.
111
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 25% (2020: 19%). The movement on the deferred tax accounts
is shown below:
2021
£m
(16.7)
–
–
(16.7)
–
(42.3)
(0.7)
9.8
(1.7)
2.5
1.5
(47.6)
2021
£m
–
(47.6)
(47.6)
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)
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
14 Deferred tax (continued)
14 Deferred tax (continued)
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 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 and disposals
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
Pensions
£m
(6.1)
–
–
(0.9)
Tax losses
£m
(26.8)
–
(2.9)
–
Hedging
reserve
£m
(25.8)
–
–
0.3
Interest
rate swaps
£m
(12.6)
–
(2.9)
–
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
and disposals
At 3 October 2020
–
(7.0)
–
–
(29.7)
(25.5)
–
(15.5)
0.6
(10.9)
0.6
(88.6)
(16.7)
(47.6)
Net deferred tax liability/(asset)
At 28 September 2019 (as restated)
At 3 October 2020
50.7
(16.7)
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.
Other
£m
4.6
–
–
4.6
–
0.8
–
(5.4)
–
Other
£m
(1.4)
(3.3)
(6.8)
–
Total
£m
130.8
(3.6)
(3.8)
123.4
0.3
(20.2)
(15.7)
(15.9)
71.9
Total
£m
(72.7)
(3.3)
(12.6)
(0.6)
Other
£m
–
5.0
–
–
5.0
Other
£m
(10.9)
(22.6)
–
Total
£m
71.9
(2.2)
9.8
1.1
80.6
Total
£m
(88.6)
(40.8)
0.8
Interest
rate swaps
£m
(15.5)
1.4
–
–
(14.1)
(0.4)
(33.9)
0.4
(128.2)
Deferred tax liabilities
At 4 October 2020
Charged/(credited) to the income statement
Charged to equity
Classified as held for sale and disposals
At 2 October 2021
Accelerated
capital
allowances
£m
26.3
3.2
–
1.1
30.6
Revaluation
of properties
£m
38.2
(10.4)
9.8
–
37.6
Rolled over
capital gains
£m
7.4
–
–
–
7.4
Pensions
£m
(7.0)
Tax losses
£m
(29.7)
0.9
2.5
–
(3.6)
(20.5)
–
0.8
(49.4)
Hedging
reserve
£m
(25.5)
–
(1.7)
–
(27.2)
Deferred tax assets
At 4 October 2020
Charged/(credited) to the
income statement
Charged/(credited) to equity
Classified as held for sale
and disposals
At 2 October 2021
Net deferred tax asset
At 3 October 2020
At 2 October 2021
112
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
14 Deferred tax (continued)
18 Assets and disposal groups held for sale
Determining the recoverability of the deferred tax asset in respect of trading items requires judgements to be made
about the future profitability of the Group. The Group has generated significant tax losses in the current and prior
period due to the impact of COVID-19 on its business operations, including enforced pub closures and restrictions
on trading. It is the Directors’ expectation that following the rollout of the vaccine and the removal of restrictions the
Group will return to profitability. The base case forecast from the going concern assessment set out in note 1 was
used to forecast future taxable profits, and allowing for a range of reasonably possible outcomes it is estimated that
the deferred tax asset in respect of trading items will be recovered within a period of five to ten years. As such it has
been recognised in full.
A deferred tax asset has not been recognised in respect of deductible temporary differences relating to capital losses
of £73.2 million (2020: £25.8 million) due to uncertainty over its future recoverability.
15 Subsidiary undertakings
Details of the Group’s subsidiary undertakings are provided in note 6 to the Company financial statements.
16 Inventories
Raw materials and consumables
Finished goods
17 Trade and other receivables
Trade receivables
Prepayments and accrued income
Finance lease receivables
Contingent consideration
Other receivables
2021
£m
3.2
9.7
12.9
2021
£m
9.4
8.7
2.5
28.9
2.8
52.3
2020
£m
2.8
7.6
10.4
2020
£m
4.4
6.0
2.0
–
3.8
16.2
Further detail regarding the impairment of trade receivables, finance lease receivables and other receivables is
provided in note 25. Further detail regarding the fair value measurement of the contingent consideration is provided
in note 25.
All of the Group’s trade receivables are denominated in pounds sterling.
At 2 October 2021 the value of collateral held in the form of cash deposits was £5.6 million (2020: £6.0 million).
113
Assets held for sale
Properties
Disposal groups held for sale – assets
Liabilities held for sale
Disposal groups held for sale – liabilities
2021
£m
5.1
–
5.1
2021
£m
–
2020
£m
7.8
341.9
349.7
2020
£m
0.111
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 identified an impairment of £1.8 million (2020: £nil) which has been recognised in the
income statement.
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
2020
£m
29.7
62.1
157.2
8.1
33.9
50.8
0.1
341.9
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
18 Assets and disposal groups held for sale (continued)
19 Borrowings (continued)
Liabilities
Borrowings
Trade and other payables
Deferred tax liabilities
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
21.2
74.5
15.3
0.111
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
2021
£m
(0.7)
36.9
6.7
(0.4)
25.0
67.5
2021
£m
188.9
640.3
364.9
337.6
40.0
0.1
1,571.8
All 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’. 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 (2020: 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.
114
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 and prior 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
69.0
2021
Unamortised
issue costs
£m
(1.5)
Net
borrowings
£m
67.5
Gross
borrowings
£m
66.3
2020
Unamortised
i
ssue costs
£m
(1.6)
Net
borrowings
£m
64.7
47.9
(1.7)
46.2
45.9
(1.6)
44.3
392.7
1,159.4
1,669.0
(3.0)
(23.5)
(29.7)
389.7
1,135.9
1,639.3
460.0
1,134.7
1,706.9
(3.7)
(24.4)
(31.3)
456.3
1,110.3
1,675.6
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
2021
£m
190.0
680.6
371.6
361.7
65.0
0.1
1,669.0
2020
£m
270.0
716.0
304.1
361.7
55.0
0.1
1,706.9
2021
£m
190.0
614.7
371.6
361.7
65.0
0.1
1,603.1
2020
£m
270.0
543.8
304.1
361.7
55.0
0.1
1,534.7
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 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
20 Securitised debt
21 Derivative financial instruments
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 2 October 2021, 3 (2020: 156) of the securitised pubs were sold to third parties.
The carrying amount of the securitised pubs at 2 October 2021 was £1,112.3 million (2020: £1,142.3 million).
The securitisation is governed by various covenants, warranties and events of default, many of which apply to
Marston’s Pubs Limited. These include covenants regarding the maintenance and disposal of securitised properties
and restrictions on the ability to move cash to other companies within the Group. The Group obtained certain
covenant waivers from its bondholders in the current and prior period as a result of the COVID-19 outbreak.
The tranches of securitised debt have the following principal terms:
Tranche
A2
A3
A4
B
2021
£m
183.9
200.0
141.7
155.0
680.6
2020
£m
209.2
200.0
151.8
155.0
716.0
The interest payable on each tranche is as follows:
–
Interest
Principal repayment
i
per od by instalments
Fixed/floating 2021 to 2027
Fixed/floating 2027 to 2032
Floating 2021 to 2031
Fixed/floating 2032 to 2035
i
Expected
average l fe
6 years
11 years
10 years
14 years
Expected
maturity date
2027
2032
2031
2035
Tranche
A2
A3
A4
B
Before step up
5.1576%
5.1774%
3-month LIBOR + 0.65%
5.6410%
Step up date
After step up
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%
The Group has agreed with its bondholders to replace 3-month LIBOR with the compounded Sterling Overnight
Index Average (SONIA) plus 0.1193% after the discontinuance of LIBOR.
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 2 October 2021 Marston’s Pubs Limited held cash of £25.8 million (2020: £25.6 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 (2020: £0.1 million).
115
Interest rate swaps
Current liabilities
Non-current liabilities
2021
£m
–
(170.5)
(170.5)
2020
£m
(37.0)
(187.4)
(224.4)
Details of the Group’s interest rate swaps are provided in note 25. Included within current liabilities above at
3 October 2020 was an amount of £19.8 million which related to interest rate swaps with a maturity of greater
than 12 months. This has been reclassified to non-current liabilities in the current period.
22 Trade and other payables
Trade payables
Other taxes and social security
Accruals and deferred income
Other payables
2021
£m
109.0
32.3
65.3
14.1
220.7
2020
£m
96.9
46.5
66.4
12.3
222.1
The Group has deferred VAT payments of £15.9 million (2020: £31.8 million) under the UK government’s scheme for
the deferral of VAT payments due to COVID-19.
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
2021
£m
8.8
–
(0.2)
3.7
0.1
(1.3)
11.1
2021
£m
1.5
9.6
11.1
2020
£m
22.3
(14.6)
(1.0)
3.0
0.1
(1.0)
8.8
2020
£m
1.1
7.7
8.8
Payments are expected to continue for periods of 1 to 48 years (2020: 1 to 49 years). There is not considered to be
any significant uncertainty regarding the amount and timing of these payments.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
24 Other non-current liabilities
25 Financial instruments (continued)
2021
£m
5.5
2020
£m
3.9
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
Total
£m
28.9
22.3
10.2
2.11
3.2
32.2
108.0
At 3 October 2020
Liabilities as per the balance sheet
Derivative financial instruments
Borrowings
Trade payables
Other payables
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
Total
£m
Fair values of fnancial instruments
The only financial instruments which the Group holds at fair value are contingent consideration and derivative financial
instruments, which are classified as at fair value through profit or loss or derivatives used for hedging.
170.5
1,639.3
109.0
14.1
1,932.9
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.
Assets
at fair
value
through
profit or
loss
£m
28.9
–
–
–
–
–
28.9
Liabilities
at fair
value
through
profit or
loss
£m
134.9
–
–
–
134.9
Assets at
amortised
cost
£m
–
22.3
10.2
2.11
3.2
32.2
79.1
Other
financial
liabilities
£m
–
1,639.3
109.0
14.1
1,762.4
Derivatives
used for
hedging
£m
35.6
–
–
–
35.6
Other liabilities
25 Financial instruments
Financial instruments by category
At 2 October 2021
Assets as per the balance sheet
Contingent consideration
Finance lease receivables (before provision)
Trade receivables (before provision)
Other receivables (before provision)
Other cash deposits
Cash and cash equivalents
At 2 October 2021
Liabilities as per the balance sheet
Derivative financial instruments
Borrowings
Trade payables
Other payables
116
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
25 Financial instruments (continued)
25 Financial instruments (continued)
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
Contingent consideration
Liabilities as per the balance sheet
Derivative financial instruments
Assets as per the balance sheet
Contingent consideration
Liabilities as per the balance sheet
Derivative financial instruments
2021
Level 2
£m
28.9
2021
Level 2
£m
170.5
2020
Level 2
£m
–
2020
Level 2
£m
224.4
Level 3
£m
–
Level 3
£m
–
Level 3
£m
–
Level 3
£m
–
Level 1
£m
–
Level 1
£m
–
Level 1
£m
–
Level 1
£m
–
Total
£m
28.9
Total
£m
170.5
l
Tota
£m
–
l
Tota
£m
224.4
There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior period.
The Level 2 fair values of derivative financial instruments have been obtained using a market approach and reflect
the estimated amount the Group would expect to pay or receive on termination of the instruments, 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 range of estimation uncertainty arising
from these valuation inputs is considered to be up to £66.2 million.
The Level 2 fair value of contingent consideration has been obtained using a market approach and reflects the
estimated amount the Group expects to receive from Carlsberg Marston’s Brewing Company Limited. There is an
agreed formula for the amount of contingent consideration to be received which references the recovery of the share
price performance as at 30 October 2021 of a pre-agreed basket of companies to pre-COVID-19 levels. The final
agreed consideration value calculated at 30 October 2021 was £28.2 million.
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.
117
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 under policies approved by the Board. The treasury
department identifies, evaluates and hedges financial risks. The Board sets 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 2 October 2021, with all other variables held
constant, the post-tax profit/(loss) for the period would have been £0.5 million (2020: £1.0 million) lower/higher
(2020: 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 swap in respect of the A4 tranche of securitised debt was designated as part of a hedging
relationship in the current and prior period.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
25 Financial instruments (continued)
25 Financial instruments (continued)
This interest rate swap has the same critical terms as the associated 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 swap 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 swap has 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 relationship are the Group’s own credit risk, changes in
the timing and amount of the interest payments and the recouponing of the swap from a single fixed rate to a
stepped profile.
The fixed rate of this interest rate swap at 2 October 2021 was 6.0% (2020: 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 gains/(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
Hedging reserve
At beginning of the period
Hedging gains/(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
2021
£m
35.6
(3.5)
141.7
5.9
(22.9)
(58.5)
5.9
(2.4)
7.2
12.5
2021
£m
(108.7)
5.9
19.7
1.7
(81.4)
2020
£m
47.9
5.0
151.8
(3.8)
(35.4)
(73.3)
(3.8)
(1.2)
6.7
14.6
2020
£m
(125.9)
(3.8)
21.3
(0.3)
(108.7)
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 prior 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.
On 27 March 2019 the Group recouponed the interest rate swap that fixes the interest rate payable on the floating
rate elements of its A2, A3 and B securitised notes. 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 are being recognised within the income statement.
The interest rate risk profile, after taking account of derivative financial instruments, is as follows:
Floating
rate
financial
liabilities
£m
516.7
2021
Fixed
rate
financial
liabilities
£m
1,152.3
Total
£m
1,669.0
Floating
rate
financial
liabilities
£m
566.7
2020
Fixed
rate
financial
liabilities
£m
1,140.2
l
Tota
£m
1,706.9
Borrowings
The weighted average interest rate of the fixed rate borrowings was 5.2% (2020: 5.1%) and the weighted average
period for which the rate is fixed was 15 years (2020: 14 years).
Interest rate benchmark reform
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of
some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). The Group
has exposures on its financial instruments to IBORs that will be replaced or reformed as part of these market-wide
initiatives. These financial instruments comprise borrowings and interest rate swaps which are indexed to LIBOR
(including those designated in cash flow hedging relationships).
The central treasury department monitors and manages the Group’s transition to alternative rates and evaluates the
extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of
IBOR reform and how to manage communication about IBOR reform with counterparties.
The Group expects that LIBOR will be discontinued after the end of 2021. After this date the Group has now agreed
with all its counterparties to replace LIBOR with the compounded Sterling Overnight Index Average (SONIA) with a
credit spread. The Group applies the amendments to IFRS 9 ‘Financial Instruments’ to those financial instruments and
hedging relationships directly affected by IBOR reform.
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.
118
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
25 Financial instruments (continued)
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.
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
2021
£m
22.3
22.3
3.5
6.7
10.2
8.4
1.0
1.8
11.2
43.7
2020
£m
22.4
22.4
3.5
1.4
4.9
8.6
0.8
3.1
12.5
39.8
Loss allowance
2021
£m
3.9
3.9
0.6
0.2
0.8
8.2
0.1
0.1
8.4
13.1
2020
£m
2.9
2.9
0.3
0.2
0.5
8.4
0.1
0.2
8.7
12.1
Finance lease receivables
Net investment in the lease
Trade receivables
Amounts due from current pub tenants
Miscellaneous trade receivables
Other receivables
Amounts due from previous pub tenants
Amounts due from other property tenants
Miscellaneous other receivables
119
25 Financial instruments (continued)
Expected credit losses have been calculated as follows:
12-month expected credit losses
Lifetime expected credit losses for trade and
lease receivables
Gross
Loss allowance
2021
£m
1.8
41.9
43.7
2020
£m
3.1
36.7
39.8
2021
£m
0.1
13.0
13.1
2020
£m
0.2
9.11
12.1
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 leased 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 COVID-19 and Brexit and forecasts of the UK’s GDP, is used to measure the expected credit losses
on these receivables.
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. Due to the very low credit risk on the
majority of these receivables the expected credit losses are minimal.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
25 Financial instruments (continued)
25 Financial instruments (continued)
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.
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, the Group maintains the availability of
committed credit lines to ensure that it has flexibility in funding.
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:
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.
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.
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
Net increase in loss allowance recognised in profit or loss
Amounts written off as uncollectible
Classified as held for sale and disposals
At end of the period
2021
£m
2.9
1.0
3.9
2021
£m
0.5
0.3
–
–
0.8
Other receivables
At beginning of the period
Net decrease in loss allowance recognised in profit or loss
Amounts written off as uncollectible
At end of the period
12-month expected
credit losses
Lifetime expected
credit losses
2021
£m
0.2
(0.1)
–
0.1
2020
£m
0.2
–
–
0.2
2021
£m
8.5
–
(0.2)
8.3
120
At 2 October 2021
Borrowings
Derivative financial instruments
Trade payables
Other payables
At 3 October 2020
Borrowings
Derivative financial instruments
Trade payables
Other payables
2020
£m
–
2.9
2.9
2020
£m
2.7
2.9
(1.2)
(3.9)
0.5
2020
£m
8.9
(0.1)
(0.3)
8.5
Less than
1 year
£m
134.7
17.4
109.0
14.1
275.2
Less than
1 year
£m
132.8
40.6
96.9
12.3
282.6
Between 1
and 2 years
£m
116.3
15.9
–
–
132.2
Between 1
and 2 years
£m
104.7
18.9
–
–
123.6
Between 2
and 5 years
£m
572.9
53.4
–
–
626.3
Between 2
and 5 years
£m
585.8
71.5
–
–
657.3
Over
5 years
£m
1,956.4
140.8
–
–
2,097.2
Over
5 years
£m
1,932.3
169.5
–
–
2,101.8
Total
£m
2,780.3
227.5
109.0
14.1
3,130.9
Total
£m
2,755.6
300.5
96.9
12.3
3,165.3
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
26 Retirement benefits
26 Retirement benefits (continued)
During the period the Group contributed to a funded defined benefit pension plan and a number of defined
contribution pension plans. These plans are considered to be related parties of the Group.
The movements in the fair value of plan assets and the present value of the defined benefit obligation during the
period were:
Defned contribution plans
Pension costs for defined contribution plans are as follows:
Defined contribution plans
2021
£m
6.1
2020
£m
9.9
Defned beneft 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
At beginning of the period
Past service cost
Interest income/(expense)
Remeasurements:
Return on plan assets
(excluding interest income)
Effect of changes in
financial assumptions
Effect of changes in
demographic assumptions
Effect of experience adjustments
Cash flows:
Employer contributions
Administrative expenses paid
from plan assets
Benefits paid
At end of the period
Fair value
of plan assets
Present value
of defined
benefit obligation
2021
£m
531.1
–
8.9
2020
£m
534.4
–
9.5
2021
£m
(568.3)
(0.5)
(9.5)
2020
£m
(570.8)
–
(10.1)
Net deficit
2021
£m
(37.2)
(0.5)
(0.6)
2020
£m
(36.4)
–
(0.6)
3.2
3.0
–
–
–
–
–
–
–
5.1
(0.8)
9.9
–
(7.8)
(1.8)
–
3.2
5.1
(0.8)
9.9
3.0
(7.8)
(1.8)
–
7.5
7.3
–
–
7.5
7.3
(1.0)
(21.9)
527.8
(0.9)
(22.2)
531.1
–
21.9
(542.2)
–
22.2
(568.3)
(1.0)
–
(14.4)
(0.9)
–
(37.2)
Pension costs recognised in the income statement
A charge of £0.5 million (2020: £nil) comprising the past service cost is included within employee costs, a charge
of £0.6 million (2020: £0.6 million) comprising the net interest on the net defined benefit asset/liability is included
within non-underlying finance costs and a charge of £1.0 million (2020: £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. 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 additional requirement has been reflected in the calculation of the Group’s net defined benefit asset/
liability in the current period and the resulting additional past service cost of £0.5 million has been classified as a
non-underlying item (note 4).
121
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
26 Retirement benefits (continued)
26 Retirement benefits (continued)
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 2 October 2021 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
2021
2.0%
3.2%
2.1%
3.4%
2.6%
2.6%
22.7
25.4
20.9
23.6
21.6
23.9
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
The Group changed its methodology for determining the CPI inflation assumption in the prior period. This 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. These assumptions have not been adjusted for the impact of COVID-19 given the
uncertainty over the long-term impact of the pandemic.
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 3.7%
Increase by 1.9%
Increase by 4.6%
Decrease in assumption
Increase by 4.0%
Decrease by 1.8%
Decrease by 4.5%
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)
2021
£m
94.2
116.7
75.3
241.6
527.8
2020
£m
76.5
135.9
58.8
259.9
531.1
The actual return on plan assets was a gain of £12.1 million (2020: £12.5 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 2020 triennial valuation and contributions of £0.5 million per month are payable until
30 November 2025. Contributions are also payable in respect of the plan’s expenses. The next triennial valuation
will be performed as at 30 September 2023.
The employer contributions expected to be paid during the financial period ending 1 October 2022 amount to
£7.5 million.
The weighted average duration of the defined benefit obligation is 16 years.
Post-retirement medical benefts
A gain of £0.1 million (2020: £0.1 million) in respect of the remeasurement of post-retirement medical benefits has
been included in the statement of comprehensive income.
122
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
27 Share-based payments
27 Share-based payments (continued)
During the period there were three classes of equity-settled employee share incentive plans outstanding:
(a)
(b)
(c)
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.
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.
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.
Deferred bonus:
Outstanding at beginning of the period
Granted
Exercised
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
Number of shares
Weighted average
exercise price
2021
m
0.4
0.3
(0.3)
0.4
–
Number of shares
2021
m
7.3
2.5
(2.2)
7.6
–
2020
m
0.4
–
–
0.4
0.2
2020
m
7.2
2.3
(2.2)
7.3
–
2021
p
–
–
–
–
–
Weighted average
exercise price
2021
p
–
–
–
–
–
2020
p
–
–
–
–
–
2020
p
–
–
–
–
–
The tables below summarise the outstanding share options:
SAYE:
Outstanding at beginning of the period
Exercised
Expired
Outstanding at end of the period
Exercisable at end of the period
Range of exercise prices
Weighted average remaining contractual life (years)
Number of shares
2021
m
3.6
(0.1)
(2.0)
1.5
0.9
89.0p to
124.0p
0.8
2020
m
7.1
–
(3.5)
3.6
0.8
89.0p to
136.0p
1.5
LTIP and deferred bonus options are exercisable no later than the tenth anniversary of the date of grant.
Weighted average
exercise price
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:
2021
p
97.3
89.2
101.3
92.4
89.5
2020
p
98.2
102.0
99.1
97.3
113.4
Dividend yield %
Expected volatility %
Risk-free interest rate %
Expected life of rights
SAYE
Deferred bonus
LTIP
2021
–
75.0 to
85.4
0.1 to 0.3
2020
6.2
23.4
0.6
N/A
3 years
5 years
N/A
N/A
5 years
The expected volatility is based on historical volatility over the expected life of the rights.
123
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
27 Share-based payments (continued)
29 Other components of equity (continued)
No options were granted in the current or prior period in relation to the SAYE. The fair value of options granted during
the current period in relation to the deferred bonus scheme was 97.0p. No options were granted in the prior period
in relation to the deferred bonus scheme. The fair value of options granted during the period in relation to the LTIP was
97.0p (2020: 90.7p).
The weighted average share price for options exercised over the period was 88.7p (2020: 122.7p). The total
charge for the period relating to employee share-based payment plans was £1.2 million (2020: £0.4 million), all of
which related to equity-settled share-based payment transactions. After tax, the total charge was £1.1 million
(2020: £0.5 million).
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.
28 Equity share capital
Allotted, called up and fully paid
Ordinary shares of 7.375p each:
At beginning and end of the period
29 Other components of equity
2021
Number
m
Value
£m
2020
Number
m
l
Va ue
£m
660.4
48.7
660.4
48.7
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. Following the disposal
of the Group’s brewing operations in the current period the remaining balance of the reserve was realised and
consequently transferred to retained earnings.
The capital redemption reserve of £6.8 million (2020: £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
2021
2020
Number
m
1.1
26.2
27.3
Value
£m
1.3
109.8
111.1
Number
m
1.4
26.3
27.7
Va ue
l
£m
1.7
110.2
9.111
The market value of own shares held is £22.8 million (2020: £11.4 million). Shares held on trust for employee share
schemes represent 0.2% (2020: 0.2%) of issued share capital. Treasury shares held represent 4.0% (2020: 4.0%) of
issued share capital. Dividends on own shares have been waived.
124
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
2021
£m
32.2
32.2
3.2
3.2
0.7
(36.9)
(6.7)
0.4
(25.0)
(67.5)
2020
£m
40.6
40.6
2.0
2.0
0.7
(34.9)
(15.9)
0.4
(15.0)
(64.7)
(188.9)
(640.3)
(364.9)
(337.6)
(40.0)
(0.1)
(1,571.8)
(1,603.9)
(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 £5.6 million (2020: £6.0 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 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
30 Net debt (continued)
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash and cash equivalents in the period
Increase in other cash deposits
Disposals
Cash outflow from movement in debt
Change in debt resulting from cash flows
Non-cash movements and deferred issue costs
Disposals and 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:
2021
£m
(8.5)
1.2
0.1
125.3
118.1
(88.9)
(0.1)
29.1
(1,633.0)
–
(1,603.9)
2020
£m
3.1
–
–
47.4
50.5
(10.6)
21.1
61.0
(1,398.7)
(295.3)
(1,633.0)
2021
£m
(1,232.3)
(371.6)
(1,603.9)
2020
£m
(1,328.9)
(304.1)
(1,633.0)
31 Working capital and non-cash movements
Working capital movement
Decrease/(increase) in inventories
(Increase)/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
Loss from associates
Impairment of goodwill
Non-cash movements in respect of leases
Share-based payments
2021
£m
2.9
(12.7)
3.4
(6.4)
2021
£m
–
84.6
14.5
–
0.3
1.2
100.6
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 10, 11 and 18.
2021
Derivative
financial
instruments
£m
(224.4)
Total
financing
liabilities
£m
(1,900.0)
–
40.3
15.9
(2.3)
(170.5)
–
165.6
15.9
(91.3)
(1,809.8)
Borrowings
£m
(1,438.3)
(295.3)
47.4
–
10.6
(1,675.6)
2020
Derivative
financial
instruments
£m
(235.5)
–
19.8
(8.7)
–
(224.4)
l
Tota
financing
liabilities
£m
(1,673.8)
(295.3)
67.2
(8.7)
10.6
(1,900.0)
Borrowings
£m
(1,675.6)
–
125.3
–
(89.0)
(1,639.3)
At beginning of the period
Adjustment for adoption of
IFRS 16
Cash flow
Changes in fair value
Other changes
At end of the period
32 Ordinary dividends on equity shares
Paid in the period
Final dividend for 2020 of nil per share (2019: 4.8p)
Interim dividend for 2021 of nil per share (2020: nil)
A final dividend for 2021 has not been proposed.
2021
£m
–
–
–
2020
£m
30.4
–
30.4
125
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
33 Leases
33 Leases (continued)
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
COVID-19 rent concessions recognised in profit or loss
Income from subleasing right-of-use assets
Total cash outflow for leases
Additions to right-of-use assets
126
2021
£m
–
11.5
–
0.2
11.7
2021
£m
62.2
287.2
–
0.9
350.3
2021
£m
17.7
0.6
0.6
0.1
0.6
41.4
93.0
2020
£m
–
10.6
0.4
0.2
2.11
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
2021
£m
25.4
26.9
83.2
583.1
718.6
2020
£m
31.1
23.4
67.3
482.8
604.6
The Group as lessor
The Group leases a proportion of its licensed estate and other unlicensed properties to tenants. The majority of lease
agreements have terms of 21 years or less. For leases where the Group is the intermediate lessor certain subleases
were reclassified as finance leases upon adoption of IFRS 16 ‘Leases’ as the classification was 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
2021
£m
0.9
5.6
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
2021
£m
7.2
2.7
2.5
2.2
2.0
10.7
27.3
(5.0)
22.3
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
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
33 Leases (continued)
The maturity analysis of the undiscounted lease payments to be received for operating leases is as follows:
Operating 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
2021
£m
11.0
9.7
7.4
5.4
4.1
17.0
54.6
2020
£m
6.11
9.9
8.7
6.3
4.3
16.3
57.1
34 Contingent assets, contingent liabilities and financial commitments
The Group has submitted claims to HM Revenue & Customs (HMRC) in respect of the VAT treatment of gaming
machines from 1 January 2006 to 31 January 2013. The claims are at an early stage with detailed information
gathering underway to support the claims made. After taking account of adjustments for partial exemption and the
capital goods scheme the amount recoverable is unlikely to be material.
The Group has issued letters of credit totalling £3.6 million (2020: £2.4 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.
127
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Company Balance Sheet
As at 2 October 2021
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
The profit of the Company for the 52 weeks ended 2 October 2021 was £234.1 million (2020: loss of £277.3 million).
The financial statements were approved by the Board and authorised for issue on 30 November 2021 and are signed on its behalf by:
Andrew Andrea
Chief Executive Officer
30 November 2021
Company registration number: 31461
128
Note
5
6
7
7
8
8
9
13
14
14
14
14
14
2 October
2021
£m
187.1
263.3
450.4
523.7
536.9
3.0
1,063.6
(691.7)
371.9
822.3
(174.6)
(5.6)
642.1
48.7
334.0
19.5
–
6.8
(111.1)
344.2
642.1
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
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Company Statement of Changes in Equity
For the 52 weeks ended 2 October 2021
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
72.6
–
–
(10.1)
1.3
63.8
–
(26.7)
3.4
(23.3)
–
–
(1.4)
–
(1.4)
39.1
–
(8.5)
0.5
(8.0)
–
–
(11.6)
(11.6)
19.5
Merger
reserve
£m
23.7
–
–
–
–
23.7
–
–
–
–
–
–
–
–
–
23.7
–
–
–
–
–
–
(23.7)
(23.7)
–
Capital
redemption
reserve
£m
6.8
–
–
–
–
6.8
–
–
–
–
–
–
–
–
–
6.8
–
–
–
–
–
–
–
–
6.8
Own
shares
£m
(112.0)
–
–
–
–
(112.0)
–
–
–
–
–
0.1
–
–
0.1
(111.9)
–
–
–
–
–
0.8
–
0.8
(111.1)
Profit
and loss
reserves
£m
978.6
(602.2)
3.6
0.3
–
380.3
(277.3)
–
–
(277.3)
0.4
(0.1)
1.4
(30.4)
(28.7)
74.3
234.1
–
–
234.1
1.2
(0.7)
35.3
35.8
344.2
Total
equity
£m
1,352.4
(602.2)
3.6
(9.8)
1.3
745.3
(277.3)
(26.7)
3.4
(300.6)
0.4
–
–
(30.4)
(30.0)
414.7
234.1
(8.5)
0.5
226.1
1.2
0.1
–
1.3
642.1
At 29 September 2019 (as originally reported)
Subordinated loan adjustment
Deferred tax adjustment
Adjustment for asset class split
Tax impact of asset class split
At 29 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
Profit for the period
Revaluation of properties
Deferred tax on properties
Total comprehensive (expense)/income
Share-based payments
Sale of own shares
Transfer to profit and loss reserves
Total transactions with owners
At 2 October 2021
129
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes
For the 52 weeks ended 2 October 2021
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.
Turnover
Turnover represents rent receivable, which is recognised over time and in the period to which it relates.
130
1 Accounting policies (continued)
Current and deferred tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in
the accounts because it excludes items of income or expense that are taxable or deductible in other periods and it
further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised
to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other
future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill
or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset is realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities
are offset when the Company has a legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Fixed assets
• Land and buildings which are either freehold or are in substance freehold assets are classed as effective freehold
land and buildings. 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. All other leasehold land and buildings are classed as leasehold land and buildings.
• 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 seven 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.
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
1 Accounting policies (continued)
When a valuation is below current carrying value, the asset concerned is reviewed for impairment. Impairment losses
are charged to the revaluation reserve to the extent that a previous gain has been recorded, and thereafter to the
profit and loss account. Surpluses on revaluation are recognised in the revaluation reserve, except to the extent they
reverse previously charged impairment losses, in which case the reversal is recorded in the profit and loss account.
Disposals of fxed 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 fnancial 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 fnancial 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 fnancial 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 fnancial liabilities
Derivatives, including interest rate swaps, are not basic financial liabilities and are accounted for as set out below.
Financial liabilities are derecognised when the Company’s contractual obligations expire or are discharged
or cancelled.
Derivatives
The Company uses derivative financial instruments to hedge the Group’s exposure to fluctuations in interest rates.
Derivative financial instruments are initially recognised in the balance sheet at fair value and are subsequently
remeasured to their fair value at each balance sheet date. The Company has not designated any derivative financial
instruments as hedging instruments and as such any gains or losses on remeasurement are recognised in the profit
and loss account immediately.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair
value is recognised as a financial liability.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets’ fair value at the date of inception
of the lease and the present value of the minimum lease payments. The related liability is included in the balance sheet
as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is
charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance
of the liability.
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.
131
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
1 Accounting policies (continued)
2 Judgements and key sources of estimation uncertainty
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.
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.
The following estimates and assumptions have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities:
Tangible fxed 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.
Subordinated loan
The 12.5% subordinated loan due from Marston’s Pubs Limited is held at amortised cost less any accumulated
impairment losses. The key assumptions in determining the amount of the impairment losses are the expected future
cash flows of Marston’s Pubs Limited, the impact of the restricted payment condition on the ability of Marston’s Pubs
Limited to make repayments and the residual values of Marston’s Pubs Limited’s properties in 2035 when it will have
repaid all its superior borrowings.
The carrying amount of the subordinated loan is shown in note 7.
132
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
3 Auditor’s remuneration
5 Tangible fixed assets (continued)
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 (2020: nil).
5 Tangible fixed assets
If the effective freehold land and buildings had not been revalued, the historical cost net book amount would be
£146.6 million (2020: £220.2 million).
Capital expenditure authorised and committed at the period end but not provided for in the financial statements was
£0.4 million (2020: £0.2 million).
The net book amount of effective freehold land and buildings held under finance leases at 2 October 2021 was
£15.3 million (2020: £18.4 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 £80.7 million
(2020: £94.0 million). The net book amount of fixtures, fittings, plant and equipment held under finance leases was
£0.9 million (2020: £1.0 million). The net book amount of fixtures, fittings, plant and equipment held as security for
bank borrowings was £nil (2020: £6.7 million).
Leasehold
land and
buildings
£m
Fixtures,
fittings,
plant and
equipment
£m
Cost or valuation
At 4 October 2020
Additions
Revaluation
Disposals
At 2 October 2021
Depreciation
At 4 October 2020
Charge for the period
Impairment
Disposals
At 2 October 2021
Net book amount at 3 October 2020
Net book amount at 2 October 2021
The net book amount of land and buildings is split as follows:
Effective
freehold
land and
buildings
£m
267.3
3.8
(23.2)
(75.9)
172.0
1.2
–
–
(1.2)
–
266.1
172.0
32.5
0.6
–
(0.2)
32.9
17.7
1.1
(0.1)
–
18.7
14.8
14.2
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
133
Total
£m
The Company has charged effective freehold land and buildings with a value of £3.3 million (2020: £4.0 million) in
favour of the Marston’s PLC Pension and Life Assurance Scheme (the ‘Scheme’) as continuing security for the Group’s
obligations to the Scheme.
Revaluation/impairment
At 4 July 2021 independent chartered surveyors revalued the Company’s effective freehold properties on an open
market value basis. During the current and prior period various properties were also 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:
Unrealised revaluation surplus
Reversal of past revaluation surplus
Net decrease in shareholders’ equity/tangible fixed assets
2021
£m
2020
£m
(16.1)
1.5
(14.6)
3.0
(11.5)
(8.5)
(23.1)
(22.1)
–
(22.1)
–
(26.7)
(26.7)
(48.8)
46.0
–
–
(44.8)
1.2
19.2
0.2
–
(19.1)
0.3
26.8
0.9
2021
£m
123.9
48.1
14.2
186.2
345.8
4.4
(23.2)
(120.9)
206.1
38.1
1.3
(0.1)
(20.3)
19.0
307.7
187.1
2020
£m
210.9
55.2
14.8
280.9
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
6 Fixed asset investments
Cost
At 4 October 2020
Capital contribution in respect of equity-settled share-based payments
At 2 October 2021
Impairments
At 4 October 2020
Reversed in the period
At 2 October 2021
Net book amount at 3 October 2020
Net book amount at 2 October 2021
Subsidiary
undertakings
£m
262.1
1.2
263.3
99.2
(99.2)
–
162.9
263.3
Where there are indications of impairment or reversal of impairment of the Company’s investments in subsidiary
undertakings an assessment is made of the recoverable amounts of the investments, which are based on either the net
assets of the subsidiary or value in use calculations. Where a value in use calculation is used, cash flows have been
derived from the latest board approved cash flows of the relevant entity, discounted at a rate of 6.5%.
The impairment reversal in the current period resulted from the realisation of the value of the Group’s brewing
operations following their disposal and the ability of the Company to access the future income from the Group’s
investment in Carlsberg Marston’s Brewing Company Limited.
These financial statements are separate company financial statements for Marston’s PLC.
134
6 Fixed asset investments (continued)
The Company had the following subsidiary undertakings at 2 October 2021:
Marston’s Estates Limited
Marston’s Operating Limited
Marston’s Pubs Limited
Marston’s Pubs Parent Limited
Marston’s Telecoms Limited
Marston’s Trading Limited
Banks’s Brewery Insurance Limited
Marston’s Acquisitions Limited
Marston’s Corporate Holdings Limited
Marston’s Issuer PLC
Marston’s Issuer Parent Limited
Bedford Canning Company Limited
Bluu Limited
Brasserie Restaurants Limited
Celtic Inns Holdings Limited
Celtic Inns Limited
Eldridge, Pope & Co., Limited
English Country Inns Limited
EP Investments 2004 Limited
Fairdeed Limited
Fayolle Limited
John Marston’s Taverners Limited
Lambert Parker & Gaines Limited
Mansfield Brewery Limited
Mansfield Brewery Properties Limited
Mansfield Brewery Trading Limited
Marston, Thompson & Evershed Limited
Marston’s Developments Limited
Marston’s Property Developments Limited
Osprey Inns Limited
Pitcher and Piano Limited
Porter Black (2003) Limited
Nature of business
Property management
Pub retailer
Pub retailer
Holding company
Telecommunications
Pub retailer
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
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
Proportion of
shares held
directly by
Marston’s PLC
–
–
–
–
–
–
–
–
–
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Proportion
of shares
held by the
Group
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
6 Fixed asset investments (continued)
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
Class of share
Dormant Ordinary £1
Dormant Ordinary 1p
Dormant Ordinary 10p
Dormant Ordinary £1
Dormant Ordinary £1
Dormant Ordinary £1
Dormant Ordinary £1
Dormant Ordinary £1
Dormant Ordinary £1
Dormant Ordinary £1
Dormant Ordinary £1
Dormant Ordinary £1
Dormant ‘A’ Ordinary 1p
Deferred 1p
Dormant ‘A’ Ordinary 1p
‘B’ Ordinary 1p
Proportion of
shares held
directly by
Marston’s PLC
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Proportion
of shares
held by the
Group
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The registered office of all of the above subsidiaries is Marston’s House, Brewery Road, Wolverhampton WV1 4JT,
with the exception of Banks’s Brewery Insurance Limited, Marston’s Issuer PLC and Marston’s Issuer Parent Limited.
The registered office of Banks’s Brewery Insurance Limited is PO Box 33, Dorey Court, Admiral Park, St Peter Port,
Guernsey GY1 4AT. The registered office of Marston’s Issuer PLC and Marston’s Issuer Parent Limited is Wilmington
Trust SP Services (London) Limited, Third Floor, 1 King’s Arms Yard, London EC2R 7AF.
All subsidiaries have been included in the consolidated financial statements. Although the Group does not hold any
shares in Marston’s Issuer PLC and its parent company, Marston’s Issuer Parent Limited, these companies are treated
as subsidiary undertakings for the purpose of the consolidated financial statements as it is considered that they are
controlled by the Group. Marston’s Issuer PLC was set up with the sole purpose of issuing debt secured on the assets
of Marston’s Pubs Limited. Wilmington Trust SP Services (London) Limited holds the shares of Marston’s Issuer Parent
Limited under a declaration of trust for charitable purposes.
6 Fixed asset investments (continued)
The Company had the following associates at 2 October 2021:
Carlsberg Marston’s Brewing Company Limited
Nature of business
Class of share
Brewer Ordinary £1
Proportion of
shares held
directly by
Marston’s PLC
–
Proportion
of shares
held by the
Group
40%
The registered office of Carlsberg Marston’s Brewing Company Limited is Marston’s House, Brewery Road,
Wolverhampton WV1 4JT.
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
2021
£m
520.5
–
–
3.2
523.7
2021
£m
521.5
15.4
536.9
2020
£m
520.5
19.5
0.1
–
540.1
2020
£m
317.0
17.8
334.8
The gross contractual amount outstanding in respect of the subordinated loan was £1,316.6 million (2020: £1,163.0
million), the impact of discounting the expected cash flows at 12.5% was £795.1 million (2020: £683.3 million) and
the accumulated impairment losses were £nil (2020: £162.7 million).
Included within derivative financial instruments falling due within one year at 3 October 2020 was an amount of
£2.3 million relating to interest rate swaps with a maturity of greater than 12 months. This has been reclassified to
amounts falling due after more than one year in the current period.
135
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
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
Other creditors
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
2021
£m
673.2
–
0.5
(0.1)
10.0
–
7.3
0.8
691.7
2021
£m
–
20.0
88.3
40.0
0.1
15.4
10.2
0.6
174.6
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
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.
9 Provisions for liabilities
At 4 October 2020
Provided in the period
Released in the period
Utilised in the period
Unwind of discount
Disposals
Charged to profit or loss
Credited to other comprehensive income
At 2 October 2021
Deferred
tax
£m
3.1
–
–
–
–
(5.9)
3.7
(0.5)
0.4
Property
leases
£m
5.3
2.1
(0.1)
(2.2)
0.1
–
–
–
5.2
Total
£m
8.4
2.1
(0.1)
(2.2)
0.1
(5.9)
3.7
(0.5)
5.6
Payments are expected to continue in respect of these property leases for periods of 1 to 23 years (2020: 1 to 24
years). There is not considered to be any significant uncertainty regarding the amount and timing of these payments.
Deferred tax
The amount provided in respect of deferred tax is as follows:
Excess of capital allowances over accumulated depreciation
Property related items
Other
2021
£m
4.2
–
(3.8)
0.4
2020
£m
5.2
3.1
(5.2)
3.1
A deferred tax asset of £10.0 million (2020: £2.6 million) 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
2021
£m
15.4
2021
£m
15.4
2020
£m
37.3
2020
£m
37.3
The amount falling due for payment after more than five years from the balance sheet date on debts repayable by
instalments was £107.3 million (2020: £107.4 million). Debts of £0.1 million (2020: £0.1 million) were repayable
otherwise than by instalments after more than five years from the balance sheet date.
Carrying amount of financial liabilities
Measured at fair value through profit or loss
Included within derivative financial instruments falling due within one year at 3 October 2020 was an amount of
£2.3 million relating to interest rate swaps with a maturity of greater than 12 months. This has been reclassified to
amounts falling due after more than one year in the current period.
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.
136
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Notes continued
For the 52 weeks ended 2 October 2021
11 Operating lease commitments
14 Reserves
At 2 October 2021 the Company had outstanding commitments for future minimum lease payments under
non-cancellable operating leases as follows:
The share premium account comprises amounts in excess of nominal value received for the issue of shares less any
transaction costs.
2021
£m
7.0
20.9
47.6
75.5
2020
£m
9.9
25.0
70.0
104.9
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. Following the disposal
of the Company’s assets associated with the Group’s brewing operations in the current period the remaining balance
of the reserve was realised and consequently transferred to profit and loss reserves.
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.
Within one year
In more than one year but less than five years
In more than five years
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
2021
£m
1.6
5.8
31.0
38.4
(17.9)
20.5
2020
£m
2.0
6.0
32.4
40.4
(19.0)
21.4
2021
Number
m
660.4
Value
£m
48.7
2020
Number
m
660.4
l
Va ue
£m
48.7
137
Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Additional
information
Information for Shareholders
Glossary
139
141
131388
Marston’s PLC Annual Report and Accounts 2021Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Information for Shareholders
Annual General Meeting (AGM)
The Company’s AGM will be held at 10.00am on 25 January 2022 at The Farmhouse at Mackworth, 60 Ashbourne
Road, Derby DE22 4LY.
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
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.
25 January 2022
May 2022
November 2022
The Marston’s website
Shareholders are encouraged to visit our website www.marstonspubs.co.uk for further information about the
Company. The dedicated Investors section on the website contains information specifcally for shareholders, including
share price information, historical dividend amounts and payment dates together with this year’s (and prior years’)
Annual Report and Accounts.
Registrars
The Company’s shareholder register is maintained by our Registrar, Equiniti. If you have any queries relating to your
Marston’s PLC shareholding you should contact Equiniti directly by one of the methods below:
Online:
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.
131399
Dividend payments
No dividends will be paid for the 2021 fnancial 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 beneft from receiving cleared funds in their bank
account on the payment date, avoiding postal delays and removing the risk of any cheques being lost in the post.
To change how you receive your dividends contact Equiniti or visit www.shareview.co.uk
Duplicate documents
If you have received two or more sets of the documents concerning the AGM this means that there is more than one
account in your name on the shareholder register, perhaps because either your name or your address appear on
each account in a slightly different way. If you think this might be the case and would like to combine your accounts,
please contact Equiniti.
Moving house?
It is important that you notify Equiniti of your new address as soon as possible. If you hold 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 certifcate, you can:
• use the services of a stockbroker or high street bank; or
• use a telephone or online service.
If you sell your shares in this way you will need to present your share certifcate at the time of sale. Details of a low
cost dealing service 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.
Marston’s PLC Annual Report and Accounts 2021Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Information for Shareholders continued
Ordinary shares
Range of shareholding
Balance ranges
1–1,000
1,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–999,999,999
Totals
Total number
of holdings
3,603
3,769
931
182
96
8,581
Percentage
of holders
41.99%
43.92%
10.85%
2.12%
1.12%
Total number
of shares
1,490,339
14,539,098
24,588,056
66,825,439
552,919,262
100.00% 660,362,194
Percentage
issued capital
0.23%
2.20%
3.72%
10.12%
83.73%
100.00%
An analysis of the register by shareholder type can be found in the Governance section on page 51.
Share fraud warning
Share fraud includes scams where investors are called out of the blue and offered an infated price for shares they
own or shares that often turn out to be worthless or non-existent. These calls come from fraudsters operating ‘boiler
rooms’ that are mostly based abroad. While high profts are promised, those who buy or sell shares in this way
usually lose their money. The Financial Conduct Authority (FCA) has found most share fraud victims are experienced
investors who lose an average of £20,000, with around £200 million lost in the UK each year.
If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free
company or research reports, you should take these steps before handing over any money:
• Get the name of the person and organisation contacting you.
• Check the Financial Services Register at www.fca.org.uk/register to ensure they are authorised.
• Use the details on the FCA Register to contact the frm.
• Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact details on the Register or you are told
they are out of date.
• Search the FCA list of unauthorised frms and individuals to avoid doing business with.
Remember, if it sounds too good to be true, it probably is.
If you use an unauthorised frm to buy or sell shares or other investments, you will not have access to the Financial
Ombudsman Service or Financial Services Compensation Scheme if things go wrong.
If you are approached about a share scam you should tell the FCA using the share fraud reporting form at
www.fca.org.uk where you will fnd out about the latest investment scams. You can also call the Consumer Helpline
on 0800 111 6768.
141400
Company details
Registered offce: Marston’s House, Brewery Road, Wolverhampton WV1 4JT
Telephone: 01902 711811
Company registration number: 31461
Investor queries: investorrelations@marstons.co.uk
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
Freshfeld 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 2021Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Glossary
BBPA British Beer & Pub Association – a body
representing Britain’s brewers and pub companies
IRI Market research provider for consumer and
retail insight
SEDEX Supplier Ethical Data Exchange – membership
organisation for auditing supply chains
Capex Capital investment
Kantar Data and insight consultancy
Carlsberg/Carlsberg UK The Carlsberg Group’s UK
brewing business
IGD Data and insight provider for food and
grocery industry
SONIA Sterling Overnight Index Average, overnight
indexed swaps for unsecured transactions
TCFD Taskforce on Climate-related Financial Disclosure
CMBC Carlsberg Marston’s Brewing Company
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
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
LIBOR London Inter-Bank Offered Rate, the benchmark
interest rate at which major global banks lend to
one another
MRO Market rent only – as defned in The Pubs Code
Mwhr Megawatt – a measure of electric power
The Pubs Code Statutory regulation effective
21 July 2016
TSR Total shareholder return – a combination of share
price appreciation and dividends paid
Total revenue Total revenue from continuing and
discontinued operations
Ways of working Marston’s values and principles that
guide our expected behaviours and actions
NAV Net asset value
WRAP Waste & Resources Action Programme
NED Non-executive Director
WTO World Trade Organisation
EBITDAR Earnings before interest, tax, depreciation,
amortisation and restructuring or rent
NCF Net cash fow – Change in debt resulting from
cash fows
EHO Environmental Health Offcer
OHID Offce for Health Improvement and Disparities
EPOS Electronic point of sale
PBT Proft before tax
EPS Earnings per share
PCA Pubs Code Adjudicator
ESG Environmental, Social and Governance
PCDR Performance, Career and Development Review
EV Electric vehicle
FCF Free cash fow – operating cash fow of the
business after tax and interest
FRC Financial Reporting Council –
independent regulator
FTSE4Good An index designed to measure the
performance of companies demonstrating strong
Environmental, Social and Governance practices
Peach market tracker Sales data for the UK eating and
drinking out market
Rapid electrical vehicle chargers Fast charging network
for electric vehicles
REGO Renewable Energy Guarantees of Origin
ROC Return on capital – a measure of how effectively
we use the capital invested in our business
141411
Designed and produced by Radley Yeldar | ry.com
The material used in this Report is from sustainable resources.
The paper mill and printer are both registered with the Forestry
Stewardship Council (FSC) ® and additionally have the
Environmental Management System ISO 14001.
It has been printed using 100% offshore wind electricity sourced
from UK wind and all the inks used are vegetable based.
Marston’s PLC Annual Report and Accounts 2021Marston’s PLC Annual Report and Accounts 2021
Strategic Report
Governance
Financial Statements
Additional Information
Marston’s PLC
Marston’s House, Brewery Road,
Wolverhampton WV1 4JT
Telephone 01902 711811
Registered No. 31461
141422
Marston’s PLC Annual Report and Accounts 2021Marston’s PLC Annual Report and Accounts 2021