Marston's PLC

Good morning, everybody. Thank you for joining us. Welcome to the Marston's preliminary results for the financial year ending September 24. My name is Justin Platt, CEO. And with me, I have Hayley Lupino, our CFO. We will take you through our results today. And we will go through it in the following running order. I'll start with some quick headlines. Hayley will then talk to the financial results. And then I will come back and give some color on our operational progress. before wrapping up and taking any questions that you might have. 24 has been a really seminal year for our company. The sale of our stake in CNBC has really enabled us to focus on our sweet spot and build a future as a simplified and a focused hospitality business. And our results show that we're already making big strides and good progress towards that future. The trading has been strong at 4.8% light for light revenue. We're ahead of the market. And we've done that while expanding our margins. As you know, a key goal for us. Terrific progress at 190 basis points versus the prior year. And the combination of those things has enabled us to step up our cash flow delivery. and returned £44 million of free cash flow. So really good financial performance, but at the same time as delivering those financials, that's gone hand in hand with us giving our guests a great time in our pubs. Record delivery for us in guest satisfaction. So that reputation score of 800 is a record for us. We've never delivered a score that high before. Really, really pleasing progress. So good financial performance and good operational performance. And as we said at our Capital Markets Day, we're now clearly focused on five key value drivers that will ensure delivery and sustained growth like that into the future. So overall, a strong year of delivery and a strong year of laying foundations for a successful future. So with that, I'll hand over to Hayley to take you through the financial results.

Thank you, Justin. So this morning, I'm going to take you through the financial performance for FY24. So if we start with the top line and we look at like-for-like sales versus FY23, what you can see is a consistent outperformance of the market. And on the right hand chart, it shows you quarter by quarter how that's flown through the year. But overall, a 4.8% year on year like for like sales growth versus a market of 3.6%. That is then translated into strong earnings and operating profit growth with significant margin improvement. So overall revenue is up 3% versus FY23 to 899, including the impact of disposals. EBITDA growth of 13% up to 193%. And as Justin pointed out, EBITDA margin growth of 190 basis points to 21.4%. That has led to a 17.9% increase in operating profit and hub operating profit margin of 16.4%, which is 210 basis points improvement. I'll come on to how we've been able to build that throughout the year on the next slide. We have interest costs of £105 million, which includes us amending our bank facility. And that has dropped through to £42 million profit before tax, which is a 65% profit growth in the year and also a 49% growth in earnings per share to 5.2p. I said on the next slide I would explain the operating margin, the improvement that we've made. So 14.3% in FY23. 1.2% improvement through our energy and property initiatives. So first of all, repairs is 0.2 of that. That is really generated by what we set out at the interim results around efficiencies to do with proactive and reactive maintenance. The remainder of that is through energy with 80% of that being through rate, but 20% coming through 8% less usage year on year. Then we move on to our business simplification. We continue to build on menus that are focused on the guests, therefore enabling us to make sure that we deliver improved profitability. Now that's 0.8. Our pub support centre restructure last year has dropped through to this as a 0.4 for the full year impact. And then our focus on pub labour productivity means we've delivered 0.1 of margin. Throughout the year, we've also invested in demand driving marketing to drive people into pubs, which means we ended the year at 16.4, which is a 210 basis points improvement, which we said we would do over a two to three year period. And we've done that in year one. That has then dropped through to 44 million of recurring free cash flow. And what you can see on this slide is that 194 million of operating cash flow, significant improvement on the previous year. I've already spoken about interest costs. With regards to CapEx, we've spent 46 million in the year. That's all been on maintenance. There's been not much transformational CapEx this year. We've focused on developing the strategy. But as set out at the CMD, we expect to start to move CapEx towards 7% to 8% of revenue. And in FY25, we expect to spend around 60 million as we move through. That has led to a 44 million recurring free cash flow. That also has the benefit of the timing of year end where we've had some weekly payroll and the payments for VAT flow after year end. So the underlying free cash flow is 30 plus million within the year. The overall cash flow has been helped by disposals, £47 million of pubs and the £206 million we received from the disposal of CNBC, leading to a net cash inflow of £310 million. And on the next slide, you can see that that has then flown all the way through to our debt, with net debt excluding IFRS 16 down to 884, ahead of our schedule of 2026, and a 27% reduction since 2022. Our debt position is predominantly long-dated, with you look at the securitisation out to 2035, and our property leasing 30 to 40 years. So less reliance on a medium-term bank facility. So overall, a strong financing position underpinned by £2.1 billion in assets, which is 83% freehold. And I'll come on to the property valuation in a couple of slides. But in terms of financing, the sale of CNBC has enabled us to right size an RCF. We know a 200 million facility that was extended and amended during the year to July 26. But there is an option to extend that to July 2027. Previously, we had 120 million of that hedged with the new facility. We now have 60 and that's fixed at 3.45 till 2029. Our long dated securitisation of £560 million out to 2035. We do have the £120 million securitisation liquidity facility, but that has not been utilised this year. And then the long term leases, which we expect to be last 30 to 40 years, are capped and collared at 1 to 4%. So although we have different pieces of debt, we have 100% of our medium to long-term financing is hedged. And then with regards to our property, we disposed of 47 million disposals in the year. And since the year end, we have completed 4 million disposals. The high quality 83% freehold pub estate was revalued in the summer. That's valued at 2.1 billion. And within the property uplift, there's been 57 million. Net asset value per share of £1.03, an increase on FY23. And that is really underpinned by the performance of the business, leading to higher property valuations and also the debt reduction that has been achieved during the year. With regards to pensions, it's broadly stayed at around £13 million year on year. But importantly, we highlighted previously our results. We have seized the £6 million contribution towards the deficit from the end of 2024. So overall, we have high quality assets, which is a predominantly freeholder state and with stable valuations. And as we look out further into 2025 and beyond, clearly at the CMD, we highlighted some targets and also there's been an autumn budget since then. But what we expect is through the execution of our operating model, we will offset the impact of the budget measures. So we are today reiterating our commitment to our stated capital market stay targets, including the two to 300 basis points of EBITDA margin. So the chart at the bottom of the slide shows that we did expect 4 million of increased wage inflation, around 7% for national minimum wage and other inflation. But with the autumn budget and the change to NI threshold and a slightly higher than anticipated national living minimum wage, there is an additional employment cost in FY25 of 4.6 million. We expect to offset this through productivity, Through energy, we have locked in electricity for 2025. We've also got gas locked in until March 2025, so pretty certain on those costs. And then other efficiencies alongside our focus on to drive spend per guest, we still expect some EBITDA margin expansion in 2025. And as part of our long-term targets, then we also see an opportunity for significant organic NAV increase over that time. So the opportunity for debt to equity transfer, what we know is that over the next three years, we'll pay 139 million of the securitisation and amortisation, which will also add around 22 pence per share. And then if we continue to grow ahead of the market or in line with the market on sales and our EBITDA margin, that should drop through to property valuations, which is around 23 pence per share. And then longer term, as we look to potentially refinance, although we don't need to, there could be some further unlock of value in the future. So this gives you a illustration of where we believe we can add value based on the strategy that was set out at the CMD. So in summary, we have had a good start to FY25 with like for like sales for the first six weeks at 3.9%. Our Christmas bookings are tracking ahead of last year with high levels of reservations. And then with regards to costs and margin, the autumn budget did place additional pressures on our costs. But we do expect to offset that and we are committed to a 200 to 300 EBITDA margin improvement over the medium term. Our cash flow in the year was supported by the CNBC sale. But importantly, we generated 44 million of underlying free cash flow and we are targeting that 50 million in the near term. With regards to financing, we highlighted back in July that the sale of CNBC would reduce interest costs versus our expectations of around £18 million. And also we've been able to right size that short term finance facility with the banks out to July 2026. So overall, a good FY24 for the business. I'll now hand over back to Justin so he can share with you some operational highlights.

Thank you, Hayley. So as Hayley says, I'll now give you some brief highlights from our year operationally. Before I do that, though, I did just want to recap a little bit on what we said at the Capital Markets Day six or so weeks ago. And the first and very important thing to say is we sit in a very lucrative market and a market that has got significant opportunity. Pubs are right at the heart of UK socialising. And hence, that's why you see a market in excess of £28 billion in value today and a market that's projected to grow at a sustained rate of 3% a year. So a big market and a growing market And within that, local pubs are thriving. So as you can see on the right-hand side of the chart, in the last 12 months, the local pubs market segment has been growing at 4%. So a good market to be in for a number of reasons. And one that we as Marstons are inherently well-placed to capitalise on. We've got a locally-based estate. 90% of our pubs Our local pubs, they are based in the heart of British communities. And we also have a well-balanced management model. So the ability to flexibly adapt to changes in the wider world is in our gift as we manage the different management models that we have in our grasp. So real value opportunity in a good and growing market. And it's against that opportunity on the next slide that you see our approach to delivering on that position. We very much set out to have a high margin business, to have a highly cash generative business. As I say, a local pub company that is based on a differentiated portfolio that seeks to meet the needs of a range of consumer segments. That's the core strategy and that's what will endure as we seek to capitalise on the pub market. But we will do that by executing against five key value drivers. And these five drivers will underpin all of our activity in the coming years. So we will seek to execute and have a market-leading operating model. The balance between revenue, cost, and guest satisfaction. Getting that balance right is key and is value driver number one. In addition to that, we will use CapEx to create differentiated pub formats against a range of consumer segments. Thirdly, we will use digital to transform our business and support what we do with our people to drive better service and better efficiency of business operation. Our fourth value driver is about expanding those managed and partnership management models that I talked about a moment ago to help support our business. And finally, the fifth value driver that will support us is in leveraging those synergies that we create almost in value drivers one to four, in targeted acquisitions. So five key value drivers to deliver on that strategy. And we will consistently manage our success against those with the key metrics that you can see on the right. So we'll seek to drive light for light revenue growth ahead of the market. We'll want EBITDA margin expansion on a sustained basis. So 200 to 300 basis points over the medium term. And any investment capex that we do go forward with will always seek to deliver ROICs in extents of 30%. So a big focus on growth and focus on those five value drivers to get us after that growth. And the good news, as you'll see on the next chart, is that some signs of early success in executing against this strategy in 24. So I'll look on the next three slides on Value Driver 1, the market-leading operating model. And you'll remember from the Capital Markets Day, very clear, this is about balancing the delivery of revenue, cost management, and guest satisfaction. So this first chart talks specifically from a revenue perspective. You can see from the graph on the left, we've consistently delivered revenue growth ahead of the market in 24. And we've started very well in financial year 25 on that same path. But the key to success in driving revenue is giving consumers a reason to visit your pubs. A constant stream of news that compels the guests to want to come and see us, to want to come and socialize with us. Cheers to Heroes was our first event of the new financial year this year. That is a partnership with the British Legion. It was a month of events in our pubs to celebrate our heroes. And we executed on that really, really well. So it's just a good example of a demand driving event that we'll use to drive footfall into our pubs. So good news in terms of revenue. On the next slide, in terms of cost, Hayley talked earlier on the progress we've made on driving our margin, made really, really good progress this year on margin. And there's a number of initiatives that we've focused on and will continue to focus on in our goal and our programmes to drive a lean and a flexible cost model. From a labour point of view, there's a lot of work going on with scheduling, and rotors using AI and a whole raft of technology to ensure we crucially have the right staff at the right time to serve our guests. from a food point of view, continued efforts to simplify our offer. And what we do here is we listen very carefully to our consumer insight and we adapt our food and drink offers accordingly. And some of that is about adding menu items. But crucially, it's about learning the areas where we can reduce complexity and take menu items out. So A, you improve the guest offer, but B, you drive efficiency in your supply chain. So really good progress on food and drink. And Hayley talked earlier about the work we've done on energy and property. It's a core competency in the business now to drive energy efficiency. I'm really pleasing to show that in 24, we've driven an 8% usage efficiency in our use of energy. So great progress on revenue, really, really good progress on cost. And as I said earlier, you'll see on the next slide that hasn't been at the cost of reputation. Absolutely delighted that in the context of driving that efficiency, we've still delivered great satisfaction for our guests. The feedback in our pubs continues to be very positive. And this is demonstrated by these are record reputation scores for us at 800. We've never scored that high before and a real testament to our pub teams. Day in, day out, delivering really engaging service, being obsessed with about meeting the needs of our guests all across the estate, all across the country. Really, really good performance. And of course, this is the key indicator of revenue growth in the future, is if you give guests a good time, guess what, they'll come back. So we'll continue to be a key focus for us is driving that satisfaction. That balance of the satisfaction for guests your cost efficiency and your revenue is what executing a market leading operating model is. And yeah, good progress in 24, but still more for us to go for in future years of the plan. And it's that really, having outlined the drivers for the future and the strategy, it's that really, that progress against that at the early stages that leaves us feeling very encouraged for the year ahead. We've got a big and a sustained events programme planned throughout the year. As I say, giving guests real reasons to come and spend their time with us, to come and socialise with us. In quarter one, it was cheers to heroes and it'll soon be Christmas, as you would expect. We are now very much engaged in the run-up to Christmas. And through quarter two to quarter four, you'll see a constant stream of news encouraging people to come and spend their time with us. But on the right-hand side of the chart, remember the other value drivers within the strategy, a key one was about the launch of new formats. And you'll see in 25, our key focus here is on launches of the two-room pub. This is a pub that is designed to drive appeal with both family diners and pub regulars. It's a format that we've piloted quite extensively. And in all our pilot launches, we've been very successful in driving incremental demand for those locations. So a big focus for our format launches this year will be the two-room. And we've got high hopes that alongside the events, that will augment our revenue delivery and set us up for a very strong and a very positive 25. So as I summarise that, On one page, a very strong and a very important year for Marston's. Strong financial and operational performance. Good early progress against our value drivers. And that's what allows us to confidently reaffirm the targets that we set at the Capital Markets Day. And in turn, as a growing company in a growing market, that will ensure that we really can be reliable deliverers of recurring free cash flow. And with that, I can hand over for questions. Thank you.