Marston's reports lower revenue, improved profit in first half

(Sharecast News) - Marston's shares were sliding on Tuesday, after it reported that first-half profit rose and margins improved despite lower revenue and the impact of accelerated investment in its pub estate.

The pub operator reported revenue of £422.7m for the 26 weeks ended 28 March, down 1.1% from £427.4m a year earlier.

Underlying EBITDA was flat at £85.9m, while the underlying EBITDA margin rose 20 basis points to 20.3%.

Underlying operating profit increased 1.7% to £64.4m, while underlying profit before tax rose 7.9% to £20.5m.

On a statutory basis, pre-tax profit increased 19.5% to £23.3m, and basic earnings per share rose 17.4% to 2.7p.

Marston's said the performance reflected disciplined cost control and efficiency initiatives, which offset the impact of its investment programme and associated pub closures.

Excluding closure periods at new format pubs, underlying EBITDA was £2.0m higher year-on-year and the underlying EBITDA margin rose 60 basis points to 20.7%.

The company completed 60 new-format pub refurbishments in the first half, ahead of its initial target of at least 50 for the full year, taking the total reformatted estate across the 2025 and 2026 financial years to 91 pubs.

It said the new formats were performing well, delivering an average return on invested capital of 35% and like-for-like growth of around 20%, while improving guest experience, increasing spend per visit and accelerating digital adoption.

Like-for-like sales for the half-year were down 0.5%, although Marston's said they remained ahead of the market. Its reputation score improved to 806 from 800 a year earlier, while its order and pay rollout was delivering faster service, higher guest satisfaction and an average spend uplift of around 15%.

Chief executive Justin Platt said the group had made "excellent strategic progress" in the first half, with a strong profit performance supported by margin expansion.

"Our pub investment strategy is performing particularly well, with 60 new pub formats launched during the year, significantly ahead of our original target," he said.

"These new format pubs are proving incredibly popular with guests while delivering very attractive commercial returns."

Capital investment increased to £39.0m from £31.0m, including £13.9m of expansionary capex, reflecting the format rollout and the delivery of the full-year expansionary programme in the first half.

Marston's said refurbishment costs remained around £260,000 per pub.

Recurring free cash flow was an outflow of £15.6m, compared with an inflow of £5.9m a year earlier, which the group said was expected and reflected the timing of expansionary capex, working capital and tax.

Net debt excluding IFRS 16 lease liabilities fell 2.7% to £857.7m from £881.1m, while leverage reduced to 4.7 times from 4.9 times.

The company said it remained on track to reduce leverage towards around 4.0 times by the year end.

Net asset value per share increased 19.6% year-on-year to £1.28, and was up around 24% since the 2024 financial year.

Marston's said it was well positioned for the summer trading period, including the football World Cup, with all 91 newly invested sites now open for the second half.

Like-for-like sales for the first 31 weeks were down 1.5%, reflecting a particularly strong April last year.

The group said it was evaluating an expanded rollout of around 100 sites in the 2027 financial year.

It added that cost discipline was expected to support continued margin progression, with electricity hedged to the end of the 2026 financial year and gas through 2027.

Marston's said it remained on track to deliver more than £50m of recurring free cash flow and full-year market expectations.

"Looking forward, we are very well positioned for the World Cup summer ahead and expect our pubs, especially our new Grandstand formats, to be in high demand," Platt said.

"Against this backdrop, we are encouraged by the outlook for H2 and remain on track to deliver full-year market expectations."

At 0938 BST, shares in Marston's were down 6.6% at 47.45p.

Reporting by Josh White for Sharecast.com.

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