Marston'S Plc Unsp/Adr

Good morning everybody. Welcome to the Marsden's interim results for financial year 26. My name is Justin Platt. I'm the CEO and with me I have Stephen Hobson, our Chief Financial Officer. We'll take you through the results today and we'll do so with the following running order. I'll give some quick headlines. Stephen will then talk to the financials. I'll then come back to give an update on some of the strategic progress we've made in the first half and then we'll take some time for questions. So it's been a really good first half for us. It's been a first half when we've made really excellent strategic progress. And that progress sets us up for a very strong year overall. Profit-wise, we've done pretty well. So we've grown profit before tax at almost 8%. Alongside that, yet another period of margin expansion. And we've done that despite some of the well-known cost headwinds. but also with some of the closure periods that we've taken as we've refurbished our estate in line with the formats. The formats have been a key success of the first half. We've done 60 of them against a plan of 50, and as we've come to, they've all performed very, very well. So all of that leaves us feeling very encouraged and positive about the second half, and hence we maintain our view on expectations for the year. So that's the headlines. I'll let Stephen take you through the financials and then I'll come back shortly.

Thank you. Thanks, Justin. And good morning, everyone. So I'm going to give you an update on what we feel is a strong financial performance in the first half, which has set up very well to deliver a good result for the year in line with all your expectations. If I start with the group's key financial highlights for the period, which show EBITDA margins continuing to expand and pre-tax profits increasing year on year. As is the case every year, the group is second half weighted in terms of revenues, profits and cash flows. This year's in particular, due to the impact of our new pub formats, the World Cup, and the phasing of some cash flows, which I'll bring out as we go through the slides. Total revenue was $422.7 million, down 1.1% year on year. EBITDA was £85.9 million, flat year-on-year, with EBITDA margin expanding 20 basis points to 20.3%. This builds on the strong margin expansion delivered last year. EBITDA and revenue were both impacted by the temporary closure periods associated with our new pub formats programme, and I'll share further detail on this in the coming slides. Underlined profit before tax was £20.5 million, up almost 8% against 2025. which, as you can see on the chart on the right-hand side, was itself a substantial step up against a small loss in 2024. There was a recurring free cash outflow in the period of 15.6 million, reflecting business seasonality alongside higher capital investment and cash tax payments. We remain confident in delivering over 50 million of recurring free cash flow for the full year in line with our CMD targets. And finally, we continue to make good progress on deleveraging reducing our leverage to 4.7 times from 4.9 times at this stage one year ago. I'll now turn to the income statement in a bit more detail. So as I mentioned, the income statement for the first half reflects continued margin expansion and profit growth, marking another period of cross-discipline and operational efficiencies, whilst also seeing increased investments for future top and bottom line growth. The acceleration of investment into our new pub formats is already delivering strong returns and will support revenue and profit growth in future periods, but clearly there is an impact from having more pubs shut in the near term while we convert them into our new summits. The average closure time is kept to just three weeks, but of course in that time, whilst you make those sales, we incur both the usual cost of running the pub and also some additional costs relating to training and restocking things like consumable items. The net impact of the additional closure periods was 2.2 million pounds of lost revenue and two million pounds of EBITDA in the first half, which is included in the underlying numbers presented on this slide. So overall revenue is down 1.1% year on year, including the 2.2 million pound closure impacts I just mentioned. And I'll give you some more color on sales in the next slide. EBITDA was flat year on year, despite the two million pound impact from closure periods. And again, I'll come on to how we achieved that in more detail shortly. Net finance costs were slightly lower year on year, benefiting from continued deleveraging, and depreciation also fell slightly as a result of lower capital expenditure in recent years and a high mix of spending in the land and buildings category, which is revalued each year rather than depreciated. As a result, profit before tax increased 7.9% to 20.5 million, and earnings per share increased 9.1% to 2.4 pence per share. Before moving on, it's important to note that the revenue and profit headwind from closure periods in H1 won't repeat in H2, as the new pub format programme for the year is now complete, with 60 pubs open, all of which will contribute to sales and profit growth in H2, alongside, of course, the 31 pubs that we converted last year. Moving on to focus on revenue in a bit more detail, I've mentioned that total revenue was £422.7 million. Within that, like-for-like sales were half a percent lower, which was ahead of the hospitality market, and which corresponds to a £2 million decline. In addition, I just covered the £2.2 million impact of having the closure periods, which related to our new pub formats. Very encouragingly, those new pub formats delivered life-like sales growth of around 20% in the post-opening periods, although clearly the impact of that in the first half was limited, given the relatively short period of time post-opening. Turning to H2, I'd like to make two points in relation to revenues. First, on the bottom left of the slide, like-for-like sales up to the end of week 31 were 1.5% lower year-to-date. However, you'll remember last year, that five-week period post the half-year showed like-for-like sales growth of over 10% due to the timing of a much later Easter, Mother's Day moving into H2, and some great weather. I thought it would be, therefore, helpful to note that the two-year like-for-likes in that five-week period have actually been quite strong. And overall, we'd say that the underlying trend from H1 is unchanged. Second, as I've mentioned a couple of times, we do have the benefit in the second half of all of our 91 new pub format being up and trading with no closure periods. The chart on the bottom middle of the slide shows our expectation as to the year-on-year sales impact in the second half of this, which in total is equivalent to almost £11 million of sales upside or 2.3% of total revenue growth in the second half. The first two bars, which relate to last year's formats and then this year's formats, impact life-like sales. The bar on the right-hand side, reduced closure periods, clearly doesn't impact life-like sales, but nonetheless it does represent the material revenue upside, which will continue to expand in future years as we accelerate the pace of our investment programme. And the number is maybe surprisingly large to you, because the sites we've been doing have been larger than average sites for the business, and therefore there's more of a sales upside. So overall, the opportunity exists to go faster in life flight growth in the second half because of this, as well as harnessing the upside from the World Cup, which Justin will talk to shortly. Moving on to margin, a key target that we set out in our October 2024 capital markets day was to grow our underlying EBITDA margin by 200 to 300 basis points compared to 2024 levels. Following strong progress last year, we've delivered a further 20 basis points of margin expansion in the first half, And this comes despite ongoing cost headwinds and the impact of the closure periods that I've just discussed. There are a few points I'd like to pick out on this slide. First, labour productivity efficiencies have once again fully offset the significant impact of increases to the national living wage and also changes to national insurance, which came into effect from April 2025. This has been achieved predominantly through further refinement of our labour scheduling tool, which continues to deliver meaningful efficiency gains. As Justin will cover, this has been achieved just as our customer reputation score continues to improve. Second, the negative movement from utilities shown on the chart has nothing to do with current market movements in energy prices. It's actually due to a gas contract which came into effect from spring 2025 after the company had enjoyed a very long-term contract which fixed its gas prices for the previous five years. Looking forward, we're well hedged on energy, with electricity prices fixed for the business in total for this financial year, and our gas pricing locked in until the end of FY27, which negates the impact of any short-term volatility. And third, the business continues to find opportunities to improve margins, both through revenue and COGS management, shown on the left-hand side of the chart, and also other efficiencies, which is on the right-hand side. And between them, they've delivered just over a percentage point of EBITDA expansion in the half. So, setting aside the impact of the closure period, our EBITDA margins moved forward 60 basis points year-on-year, which gives us confidence in the second half. And then including the impact of those closure periods, EBITDA margin was 20.3% in the period. We have good cost visibility going into H2. I've talked about energy already, but also on other key cost areas, and as such, we continue to expect to make further progress over the full year as we move towards our medium-term margin targets. Turning now to the pub estate, since the introduction of our strategy in 2024, Marston's has successfully delivered growth through the core estate with EBITDA per pub after central costs increasing 29% to £155,000 over that period. Growth has come from strong operational execution as well as many cost and revenue initiatives. But one of the most powerful levers in recent times has been through our investment strategy. And as the chart on the right shows, the EBITDA per pub after central costs in our invested pubs has increased materially from £265,000 pre-investment to £354,000 post-investment. This £90,000 increase per pub, which represents a 35% EBITDA return on our £260,000 average investment per site, illustrates quite well the speed of progress, both in terms of driving profitability and estate quality that can be made through our investment programme. And looking ahead, we expect to build on this further through the acceleration of that program, which Justin will cover shortly. Overall, this is resulting in a higher quality, better performing estate, giving us confidence in our ability to drive further life-like sales and EBITDA going forward. Turning now to cash flow. As a reminder, cash generation in the group is naturally weighted towards the second half, with H2 typically significantly more profit and cash generative than H1. This effect is more pronounced this year, driven by the decision to complete the investment format programme all within the first half, alongside the timing of corporation tax payments and other items which I'll cover shortly. Really importantly, we remain confident in delivering our £50 million recurring free cash flow target for the year as a whole. So, starting from the top, cash-adjusted EBITDA saw marginal growth despite the cost headwinds and closure periods which I've covered already. Working capital saw an outflow of £9.3 million, reflecting business seasonality as well as the number of supplier payments which made this outflow higher than usual. But we expect this to unwind over the second half with a small working capital inflow for the year as a whole. On tax, as we communicated at the prelims, we've now moved to the so-called very large company corporation tax regime. The impact of that is that in FY26 we have made six or we will make six quarterly tax payments as opposed to the usual four. four of those cash tax payments were made in H1, with the remaining two to come in the second half. So you should expect to see the cash tax lower in H2 than the 7.1 million on the screen. Net interest increased slightly year-on-year, although we expect this to be slightly lower year-on-year by the year-end. And then, as I mentioned, CapEx was the largest driver of the year-on-year movement, increasing by £8 million year-on-year. reflecting the decision to weight the format investment programme into H1 to maximise value generation, including all the trading benefits that we're going to see in the second half. We do expect full-year capex to remain within the 7% to 8% turnover range which we communicated back at the C&D. As a result of all these factors, recurring free cash flow was an outflow of £15.6 million. However, we expect a strong reversal in H2 of that, and as I said at the top of the slide, we remain confident in delivering over £50 million of recurring free cash flow in the year as a whole. I now turn to the group's debt structure. So our long-term financing structures remain in place, and those long-term structures are supported by our revolving credit facility, which in the year we extended for one further year until July, 2028. Our Securitisation continues to provide long-term, predictable financing. Scheduled amortization saw a reduction of 44.7 million compared to this time last year and continues to be the main driver of deleveraging for the group as a whole. It's worth noting that while there remain operational restrictions in place as a result of the securitization, our team continues to make significant progress internally to manage and reduce those restrictions as we continue to delever. Other lease-related borrowings, or OLRBs, remain relatively stable in the period, reflecting the long-term nature of that financing. And the balance on our £200 million banking facility at half-year was £56 million, or £53 million net of un-amortised issue costs, as per the slide, reflecting the cash outflow that I've just discussed. Compared to the same point last year, leverage excluding IFRS 16 leases is down by 0.2 of a turn, and we remain on track to reduce net debt to around four times by the end of the year. Moving to the balance sheet. Our balance sheet remains really robust and is underpinned by £2.2 billion of property assets, with 82% of the estate held as effective freeholds. The net book value of our PPE increased by £136 million compared to a year ago, reflecting the property revaluation which we discussed at the full year. As I've just shown, net debt excluding lease liabilities reduced to £857.7 million, a year-on-year reduction of £23.4 million, with lease liabilities relatively flat year-on-year. Other liabilities increased £18.9 million, primarily due to the deferred tax impact from the proxy reval gain in FY25. And together, these movements have driven a £134.5 million increase in net assets, which now stands at £812.9 million, which is up 21% year-on-year. As a result, NAV per share has increased to 128 pence, underpinning the value of the business, and we expect this value to continue to grow through the coming periods. And then moving finally to the outlook, before I hand back to Justin, there are five key points I'd like to make here. First, we remain confident in the trading outlook for FY26. We do expect lifelike sales to increase over the balance of the year, supported by the rollout of the new pub formats and the opportunity that the World Cup brings in the summer. Secondly, our format program itself is clearly now establishing itself as a key growth engine for the business. With 91 sites now operating under our new formats in total, we expect to see an increasingly meaningful contribution as we move through the second half and into future years. Third, we expect further margin expansion in H2, supported by good cost visibility and continued productivity improvements, keeping us on track to deliver our medium-term target of 200 to 300 basis point improvement against 2024 levels. In terms of cash, the outflows seen in H1 are expected to unwind in H2, with a group on track to deliver another year of over £50 million of recurring free cash flow. And then finally, we'll continue to reduce our leverage with further progress towards four times by the end of the year. So, to summarise, we've delivered a strong first half with clear financial progress, and we remain confident in meeting our FY26 expectations and delivering another strong set of results at our prelims in the autumn. Thanks very much. I'll hand back to Justin.

Thank you, Stephen. So, yeah, I'll take you through some of the progress we've made strategically in the first half. Just as a reminder, the approach we take to driving value at Marston's is to be a high margin, highly cash generative local pub company. We do that with a focus on differentiated formats that appeal across a range of consumer segments. That was what we laid out at the Capital Markets Day and continues to underpin our approach. The five value drivers you can see on the screen, the two I will talk to today are the first two. I execute in the market leading operating model and using CapEx to create these differentiated pub formats. So first of all on the operating model, I mean really this is about the essence of running a good pub business. It's effectively balancing revenue delivery, cost efficiency and guest satisfaction to drive returns. As Stephen has said, we've done that successfully in the first half to reliably deliver profit growth. And we've done that with both sides of the slide here. So from a revenue point of view, tough market, but steady H1. And we've done that really through our peak performance. So peak trading up north of 5% and within that, best ever Christmas. So from the revenue side, steady and resilient. Alongside, though, we've complemented that with our approach to margin, as Stephen said. Continuing to look at every single line of the P&L where we can drive productivity, combination of offering a great guest offer whilst also managing our costs. I think that final point on the slide is also very important. Taking a very disciplined and judicious approach to discounting in the first half. As the markets got a bit softer, there's been an avalanche of discounts across the pubs and the restaurant space, particularly on food, I'm talking here. And whilst we have offered discounts in certain places where we believe it can enhance the experience and our returns, we've been quite careful with that. What we didn't want to do was trade the top line for the bottom line. So overall, the combination of the two has allowed us to deliver that reliable profit. But alongside that, of course, But business only wins if you keep doing this right, if you keep giving guests a great time. So the great news is that whilst we've driven the profit growth, we've continued to make good strides on guest experience. So reputation scores up again at 806, continuing to make progress. And we do that on three things. There's probably three big drivers behind this. The first one, events. For those of you in the room, you can see the posters around the room. This is about giving guests a reason to come to our pubs. So in the first half, we've had a Luke Humphreys Darts Tournament. We've got a Trivial Pursuit National Pub Quiz. And the family IP Matilda we've been bringing to our pubs. So appeal across a range of demographics to really drive engagement across our pubs. Alongside that, we've continued with order and pay. Order and pay is really important to us, giving guests the opportunity to not have to get up from their table to order their food or drink. That continues to grow and do well for us and supports guest service. But underneath all of it, really is about the service that our managers offer locally. It's about having a passionate team of people who are passionate about delivering great guest service day in, day out. And they've continued to do that through the first half of the year. So on the operating model overall, good delivery on profit, continued progress on guest experience. That leaves us feeling really good about the foundation that that leaves us for the second half. So that's the operating model. Secondly, onto the formats. So as we've said, We've launched 60 of these new format pubs in the first half. The plan was 50, so we're ahead of plan. Roughly half of them on the grandstand products and half of them on the two-door, such that we've got north of 90 out there now. So, really, really good progress. They're all doing exceptionally well. Normally, when you launch new formats like this, you kind of get a winner and one that's soft. What surprises is all of them have worked well across different formats and demographics. You've got a top line growth across these products of 20%. And the returns, you remember our hurdle is 30%. The returns at the moment are averaging 35%. So very, very popular. It doesn't matter whether it's Woody's for families, if it's Two Door, which is a split two-in-one pub, or Grandstand, our locals pubs. Great appeal, great returns. So the real standout performer amongst these, certainly in the first half of this year, has been Grandstand. So what I thought I would do is just give you a bit more depth into what's behind the Grandstand model to help you understand the way some of our formats operate. And I thought one of the best ways to do that was for you to hear from some of our local pub managers about what this Grandstand pub is all about.

It's buzzing. You get all the locals coming in, depending what game's on. It's a Sevilla, it's my year, it's unreal. Great atmosphere, good crowd.

Entertaining. Brilliant. Full of locals. New people.

The TV screen actually shows four different games at once. So if you want to watch Premiership, Championship, this is the venue to be at.

It's a fantastic venue, as I say. It's a Thursday night. Plenty of people. Good beers as well. Good venue. Good beers. Good night.

Looks amazing. Looks amazing. The investment, you can tell it's come a long way. Martians have done really well.

It's got to be loaded fries. Capsule fries. Part of that. And then maybe the burger.

We've come to our outside seating area. We've got great trestle tables for people to celebrate with their friends and some stadium seating here. The television at the end there, you're able to see in rain or shine. We're really coming to its own in the big day, supporting England. We'll show Formula One, Six Nations Rugby. There are hubs for people to come and celebrate whatever sporting occasion they want to watch to really, really enjoy their local pubs.

So Grandstand, very popular with our pub managers, very popular with our guests. And as I said, the commercial returns actually have really astonished us at how strong they've been. market share and this is measuring the market share of a local grandstand pub in its locality. We've gained 1% on average across all the areas that we've launched. And one of the biggest things behind that is the visit frequency. What grandstand isn't is only a venue for the big match or the big occasion. It's accessible enough that people will come on different nights of the week as well as on those big match occasions and that's reflected in the visit frequency. So our visit frequency has gone up from an average of five and a half visits a year to almost six and a half visits a year. That's then translating into revenue. So revenue growth of around 30% on a like-for-like basis. And that's partly because of that visit frequency, but also we're improving spend. So spend's up 7%. So quite a unique food offer that we've put into Grandstand alongside the drinks. So that's really helping alongside the visitation, push up the revenue. And, of course, that then translates into the returns. So the revenue, the top line is good. But remember, to Stephen's point earlier, on average, these are £280,000 a pub. It's not a very, very expensive conversion. And then the returns we can get are really strong. So good commercial returns, and that then plays into the operating model. So if you think about the things we talk about on the operating model overall, what's happening with Grandstand and indeed with the other formats is it's just turbocharging and acting as a multiplier. So I'll talk in a while about the power of the World Cup and what it can do for us this summer. That's across all of our estate. Imagine what it can do in a Grandstand pub. On a reputation point of view, I've just shown you 806. Grandstand's scoring 848. Order and pay, we're a bit north actually of 11% now as a total business. Grandstands 14.5% and of course that helps us in our spend. And then finally EBITDA margin, Grandstands ahead of the total company in its EBITDA margin. This is where you start to see the value drivers working together and these formats complementing what we're doing on the operating model. I think the big thing now really with the formats is I've talked to you over the last couple of years about these formats and we've very much been in test and learn mode. We're not in test and learn mode anymore, certainly from this half onwards. We've got enough in the business, at 91 in the business, we've got enough that these will contribute to the top line and to the bottom line across the total business. So we've had a really good look at the whole estate in terms of the rollout opportunity and we've mapped all of our pubs, so we've mapped the demographics and the populations around all of our pubs, worked out which ones can be grandstands, which one can be woodies, which ones can be two doors. We think there's about a 600 pub opportunity, a conversion opportunity, and of those 250 or so on grandstand. So, really clear now, significant rollout opportunity. We've got 91 to capitalise on this year, but beyond them more, which is why we're saying today we're going to accelerate this rollout programme, and that will be over a number of years. We'll confirm exact numbers to you in the prelims in November, but we'll be doing in the region of 100 next year to really get behind this. So, big, big driver of top line for us in the second half, but then for many years to come. And really, that's what leaves us feeling positive about the outlook. Of course, we've got a World Cup summer ahead with a community-based estate, high proportion of drink sales. Big football tournaments are always very big for us across the summer. But alongside that is just the general momentum. Outdoor spaces, beer gardens are very important. So the general momentum of a World Cup summer outside of the tournament as well as in the tournament can be very positive. But alongside that, as we've said, 91 of these pubs. A lot of these pubs that we've done in the first half didn't actually open until March. So we're not actually getting the benefit until the second half. And this is the first time that we'll have been through a peak season with a meaningful number of pubs. So it's the combination of, if you like, the World Cup summer and those new formats firing for us that leave us feeling very confident about our outlook. So in summary... Strong H1 in terms of profit delivery, excellent strategic progress where the new formats are delivering. We feel good about the H2. And as a result, we're very much continuing our guidance and we're on track for expectations for the year.

So with that, we can take any questions that people may have.

Two or three questions, if it's okay. In terms of the pipeline for conversions in 2027, will that be half unfocused as well, do you think? That's the first one. Is Tudor going to be sort of number two after Grandstand in terms of the pipeline? And in terms of the estate, obviously you've got a big NEP at 128P and growing. Are you tempted to make any disposals anywhere in the estate? And last question was in terms of trading, have franchisees or tenants, anyone in any way cut back in any opening hours because of any costs?

Thank you, Doug. So let me start with the last one. No, with opening times, we've very much protected that, both from our partners or a managed estate. While there's the demand there, we will continue to mop it up. So we have very much protected our opening hours and wouldn't touch that. In terms of the formats, we'll very much aim to do the conversions in H1. As Stephen said, it's approximately three weeks closure. And so of course what you try and do is you try and do those closure periods in the lower months. So really this time it's been, this half it's been October, November. We obviously don't then do that in December because December is a good trading period and then January to March. So we're still laying down exactly what it will be. But yeah, we'll tend to do the H1 because that then allows us to have a full period through what we know is our biggest period, which is basically between May and August of firing on all cylinders. In terms of the mix of Tudor and Grandstand, I mean, in essence, Tudor was the first off the rank. This time last year, I was talking to you all about Tudor in a bit more depth because we did 25 or so Tudors last year alongside the 30 or so we've done this year. So it was kind of Tudor was a big focus last year. Grandstand's starting to grow. I mean, we're in the fortunate position now that they're all working. I kind of feel like a football manager with 15 good players and it's who makes it to the first 11. So we can have a look across the estate and work out what our priorities will be because they're all working and honestly I didn't anticipate that. I expected some winners and some losers but they're all working and that will enable us to pick the right plan for the year. And your last question with disposals. Look, we always look at the estate. There's always elements of the estate that you'd like to pull some in and you'd like to move some out. It's not a major focus. Part of our assessment on looking at the formats, part of the assessment is looking First of all, are they good pubs in good locations? But then secondly, the extent to which they're suitable for these formats. And that's why, looking at the estate, as I say, 600 or so are absolutely bang on. It's data-led. It's not like, oh, we quite fancy this one being a Woody's. It is completely driven by population and demographics. And the remainder, by the way, outside of the 600 are our locals pubs, which is our fifth format, that doesn't require as much format conversion. So... So, yeah, we do look at disposals, Doug, but it's more on what you would expect of a better churn.

You've got the mic. Hi. Caroline Gulliver from XG Development. Two questions, if I may. The first is on labour scheduling. You've obviously done a really good job already on improving labour productivity. How much more opportunity is there to go if you roll out order and play with that labour scheduling system?

Yeah, you're right. We have done a lot of work on it. And the interesting thing is often your mentality is not how do I save cost, but how do I get more staff on at the right time? It's as much about having more people on on a busy Friday night than it is about having less people on on a quiet Tuesday afternoon. The biggest factor in it is how good you can get with your sales forecasting. That is the single biggest driver of it. So there's a bit on rosters and the ways we have a staff app and a rotaring app and there's various things that are very helpful. But the most important thing is how you can get better at your sales forecasting. And frankly, we get incrementally better on that every month. And I think we will continue to get incrementally better as you forecast trading patterns up and down.

That very neatly brings me on to my second question, which is, what does a successful World Cup look like for you? And really, I'm just trying to understand, what's the sensitivity to how well England do, perhaps, for Grandstand? But then, perhaps, because you've got so many diversified formats for the whole group, you know, is it particularly sensitive, or are you not bothered? And just as sort of a corollary to that, weather. You know, you mentioned beer gardens. There's a lovely summer weather at 1%, 2%, like, like, or vice versa.

Yeah. And you're right, actually, the two link in the sense that the first thing to say about the World Cup is there's two real strengths of it this time versus previous years. First of all, there's an extra round of games. So it previously would go second round quarterfinals. It now goes second round, round of 16 quarterfinals. So there's an extra round of games, which is helpful. But secondly, the kickoff times in the sense that The biggest dynamic change in pubs in the last 20 years is the busiest time is 6 to 7 o'clock in the evening. The quieter time is 10, 11 o'clock in the evening. And therefore we know we can get people in early evening. But because many of the kick-off times are 9pm or 10pm, certainly for the England games, we know we can get people in early and then they'll stay through the evening. So that's an opportunity. I think to your point about what success looks like is It's not just about the games. It's about the momentum and the feel-good factor it creates in the country for people visiting the pubs generally. So what we don't see is, like, of course you get a big spike on a big England game in the English pubs. You do get that. But It's more about the momentum where the pub becomes, you know, in community pubs, you remind everybody that it is the centre of your community where you're all going to go and meet. So you end up going midweek as well, as well as going at the weekend to watch the game. And that's a bit analogous to the way I described Grandstand as a product before, is people will come and watch the big game, but it will remind them that they quite like that venue. So they'll bob in on a Tuesday as well. So really it's about the overall feel-good factor for the year. And it can work across all of our pubs, frankly. Our Signature and our Woody's, which are our more food-based pubs, again, you create that momentum, and that's where our outdoor spaces come into their own. So we think it can work across a major portion of our estate, and really it's about a feel-good factor across the country. Thank you.

Hi, Karan Puri from JPMorgan. I've got two questions, if I may. The first one is on the like-for-like. So just, I mean, you know, you sort of shared that you're outperforming the market in terms of like-for-like growth. But if you look at some of your closer pairs, it's sort of a 3 to 5 point. Just trying to understand what's sort of driving that. Is it geographical exposure, different segment exposure? And are you seeing any sort of consumer weakness across any part of your business? That's the first one. Yeah, maybe we can start with that.

Do you want to start with that, Stephen?

Yeah, I mean, there are a lot of side points in the first half. It's sort of where we expect it to be to some extent, Karen. I mean, obviously the market's pretty tough at the moment. We always need a big opportunity for us as NH2 because of the World Cup and because of the formats, as Justin sort of said. And, you know, we've said that we're outperforming the market, which is to do with some market data, proprietary data that we have, which includes the whole market. And, you know, that's kind of where we sit. So I think the opportunity definitely remains in NH2. We're sort of as we expect it to be. And I think compared to some of the peer group, Quite a lot of the companies have quite different dynamics. You know, we sort of look at Young's and Fuller's and they're very London-based. MV's got a much larger portfolio in food than we have, et cetera. So it's quite hard to read across the different sectors. I don't know if you want to build on that.

You know, the way we think about it, when we laid out the strategy at the Capital Market State, we view ourselves as a hospitality business. So our peer group is public and private, pub and restaurant, and across the piece. And so there's different segments within that.

Thank you so much. The second one is on the balance sheet and capital returns, I guess. You seem to be pretty much on track to hit the 4x net derivative. Do you have any sort of thoughts in terms of how you plan to return capital to shareholders? Could that be? dividend share buybacks, I know it's a bit early, but any thoughts are welcome here.

Yeah, I mean, it's something we'll consider over the second half. You're right, the trend is that we should be close to four times, probably not quite four times by the end of the year, but close to four times by the end of the year. And I think you guys have us at about 4.1 or 4.2, something like that. So, you know, it's clearly something the board will consider going forward. I mean, I suppose what I would say is that, you know, the board will need to consider all different uses of capital, including investing in these excellent returning formats, shareholder returns as well, you know, and resilience of the business. So we'll have a good think about that as a board over H2, and we'll give you an update. It's brilliant.

Thank you so much.

Thank you very much. Anna Barnfather from Samuel Libran. Just on slide seven, you set out the sort of uplift in the second half from the reformats at 1.7%. Just wondered if you could expand on what sort of revenue uplift that is on those 91 sites and whether that's exclusive of World Cup or World Cup is on top of that. And then the second question, I guess, is a bit more of a follow-on to the capsule question at the end of the year, if you get towards four times. You've mentioned that you're negotiating to reduce the restrictions. Is that the cash in the securitization vehicle or anything else on that? Thank you.

Yes, so in terms of size 7 now, I mean the £11 million in the bullets is what we think the impact on revenue will be from those formats. So the three bars on the chart, the biggest bulk of them is the FY26 update. So that 1.7% is the impact on the group's total revenue year on year in H2 as a result of the formats that we did in the first half. So it's actually quite a meaningful number and if you back solve it, you'll work out it's quite, it's an average weekly take that's quite a bit higher than the estate average, but it will have quite a positive impact on us.

Just as a clarifier, so they've done 20% like fly cup lift, the grandsons have done 30, is that

That's equivalent to 1.7% on the total group turnover in H2. Which is why we're feeling so positive about H2, really, because we can directly see our own forecast, £11 million a year on your sales upside from those formats. Most of that will be in the live flight number. The closure periods won't be, because we strip our closure periods from live flight accounts. But in total, it's a good upside. And then your second question on restrictions. What I was alluding to there more was that The securitization does impose restrictions on the company and there's lots of, I mean, the rule book is sort of, you know, 10 inches thick kind of thing. But we as a business have been working with the Securitisation for 20 years now and actually the restrictions that it places on the business, for example you have to spend a certain amount of maintenance capex, getting cash out of the Securitisation is a bit tricky. We know how to deal with that and so the point I was trying to make is that actually as we run the business, as we decide what to invest in, what to do with the strategic plan, we can do that despite the restrictions of the Securitisation being in place. We've also done quite a bit of work on distributional reserves as well. So we had negative distributional reserves a year or so ago. We're now in a positive position. So if we want to think about returns, we actually can do that, whereas before we couldn't.

Good morning. I've got a couple of questions. Just on the margin and the outlook, another way of sort of looking at it, is cost inflation. So you did a fantastic job in the first half of cost being down. What's in the outlook for sort of year-on-year cost growth is for the full year? Secondly, with the increase in reformats to 100 next year, does that change the view on the sort of 50 million recurring cash and sort of capex of 7% to 8% of revenue? And then thirdly, just thinking about sort of the property valuation at the year end, Given the uplift in profitability for pub you're seeing, is it as straightforward to think we can put that uplift in EBITDA or multiple that uplift on EBITDA straight through or will the value take longer to appreciate that?

So margin and cost inflation, we're actually quite well set for the second half. And so the general situation, Greg, is that As I mentioned in the slides, the energy prices are locked and loaded and then other stuff that we buy, food, drink, labour and stuff, we know the prices of those. We have long-term contracts, annual prices at least. So if inflation were to peak, that would more be a 2027 thing rather than a 2026 thing. So we do have good visibility across the whole ethical space in the second half. I can't say that if there's not a real big spike in inflation that we won't have suppliers wanting to have a conversation with us and we'll of course engage with any supplier on a normal basis if they come and talk to us but as of now contractually we're in quite a good position and I think inflation should be okay in the second half. Next thing with the reformats. I think the 50 million recurring free cash flow is a really important number. It talks to the business's ability to generate cash and consistently generate cash. We put it up there as one of the four key targets of the CMD just a couple of years ago. So we're really committed to that being something that the group delivers. We think that we can extend our investment program to circa 100 million each year and still deliver recurring cash flow of 15 million and that's what we intend to do.

One of the key things on that Greg is you remember when we designed the formats is being clear how much you can invest per pub. It's one of the strengths of it is whilst they perform at a revenue level, as I say, you're only spending between 250 and 280,000 pounds a pub so that allows you to do a significant number. without breaking your other commitments on cash flow and caps allocation and CapEx percent of revenue still remain at 7% to 8%. So that's why we're so confident in the model going forward is we've got a formula that works for sensible and judicious amounts of CapEx.

And then the property reval, I mean, it's not quite as straightforward as EBITDA goes up and therefore valuation goes up because The two factors are the EBITDA that a so-called reasonably efficient operator would deliver rather than what masters would deliver. And then there's a market multiple applied to that. if we see a big improvement in EBITDA as a result of doing investments in sites, that doesn't straight away feed through into a property reval increase because the investment and another efficient operator may not have done that. So I think in time it supports the property revaluation and it does give a bit of an upside but I don't think you should just go EBITDA is up therefore property reval goes up as well. It's a bit more to it than that.

Thank you. Any more for any more? Good. Well, thank you for joining us, everybody. Have a good day. Thank you.