Marston's PLC (the "Company")
Annual Report and Accounts and Notice of Annual General Meeting 2023
In compliance with Listing Rule 9.6.1R, the Company announces that the following documents have today been submitted to Financial Conduct Authority's Electronic Submission Service and may shortly be viewed on the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
· 2022 Annual Report and Accounts;
· Notice of Annual General Meeting to be held at 10am on 24 January 2023 ("AGM Notice");
· Proxy forms for the 2023 Annual General Meeting;
· Rules of the Marston's PLC Sharesave Scheme, proposed for approval; and
· Rules of the Marston's PLC Long Term Incentive Plan, proposed for approval.
As required by DTR 6.3.5R(3), the Company confirms that the 2022 Annual Report and Accounts and AGM Notice are now available to view or download from the Marston's PLC website: www.marstonspubs.co.uk/investors/. The 2022 Annual Report and Accounts have been prepared using the single electronic reporting format specified in the TD ESEF Regulation.
A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Company's preliminary results announcement on 6 December 2022. That information together with the information set out below, which is extracted from the 2022 Annual Report and Accounts, constitute the requirements of DTR 6.3.5 which is to be communicated via an RIS in unedited full text. This announcement is not a substitute for reading the full 2022 Annual Report and Accounts. Page and note references in the text below refer to page numbers in the 2022 Annual Report and Accounts. To view the preliminary announcement, slides of the results presentation and audio webcast please visit www.marstonspubs.co.uk/investors/results-presentations/.
For further information, please contact:
Bethan Raybould
General Counsel & Company Secretary
01902 329163
Additional information
Our Principal Risks and Uncertainties
The following principal risks are recognised by the Board as those that could impact upon the operation of the business and the achievement of its strategic objectives.
This is not intended to be a complete assessment of all risks as the Group risks change over time.
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Risk |
Description |
Potential impact |
Mitigation |
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1. MARKET AND OPERATIONAL |
During the current cost of living crisis, including high inflation and consumer price sensitivity, there is an increased risk that our prices become uncompetitive. Inflationary pressure on costs might be difficult to pass on, resulting in reduced margin.
Marston's revenue is dependent upon being able to offer, and attract, our guests to an enjoyable experience of high quality food and drink at the right price. It is reliant upon attracting existing guests back and winning new guests. To achieve this we compete for high calibre people to operate our pubs and focus heavily upon their training and management. We carefully choose our suppliers and the food and drink offered to our guests. Uninterrupted operations are dependent on the continual supply of goods and services, often from single sources. The operational performance of our suppliers is materially significant to our total profit.
Failure to attract or retain the best people can impact our pubs' performance. Recruitment is more competitive due to a tightening labour market and wage inflation. Disruption to key suppliers, particularly those closely involved with our day-to-day activities or shortage of commodities could significantly impact our operations. Disruption to food supplies from the EU due to administration, or customs checks, could impact upon our offering to guests if we were unable to find substitutions. These factors could mean over time that our pubs fail to attract guests, or do not reflect changing preferences, or offer poor service or quality. |
• 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 |
• 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 • Tracking guest feedback on Reputation.com and targeting our sites with improvement • Cost control, including menu margin analysis • Investment, location and design of our pubs • Continual awareness of our people offer compared to our competitors through participation in appropriate networks • Improved training, induction and development programmes • Tracking the engagement of our employees and identifying action points for teams • Continual assessment of suppliers' resilience and capacity • Contingency planning with suppliers: identifying how products or services can be substituted |
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Movement - Increased Competition to recruit and retain the best people increased during this financial year. Since reopening after the lockdown in 2021, there have been short-term supply chain problems, although any disruption has been alleviated without significantly impacting our guests. |
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Linked opportunity Build the reputation of Marston's as an affordable, high quality experience particularly when consumers are likely to change buying behaviour whilst the cost of living increases. |
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Risk |
Description |
Potential impact |
Mitigation |
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2. PANDEMIC |
COVID-19 demonstrated how a global pandemic can impact our industry and public life. One would anticipate that at some point in the future another pandemic will occur. The severity of a future pandemic upon human health and the duration of measures taken to reduce the infection rate are uncertain.
There is a risk that a variant of COVID-19 or another form of pandemic causes infection rates to increase, leading to future restrictions on the public and trading regulations imposed on pubs and lodges. |
• Ability of our teams to operate safely • Reduction to the numbers of guests, and shorter stays at our hotels • Increased operating costs |
• Remaining alert to Government advice • Auditing our readiness to implement a response effectively • Adaption of our pubs to facilitate social distancing when required • Training available for our pub teams • Building contingency plans for future lockdowns • Consulting with our employees during an outbreak 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 |
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Movement - No change in risk Pandemic remains a risk to our business. Future variants of COVID-19 are possible, while vaccination rates remain lower in many countries. Future Government restrictions on trading could be announced in response to the NHS once again coming under pressure. |
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Linked opportunity Our pubs were sorely missed during the lockdowns, demonstrating their importance for social interaction and leisure. Pubs benefit from the increase in spend within the locality of the home, as people spend more time at home and are less likely to holiday abroad. The reopening of a pub is a chance to reinvigorate its offering and to stand out to guests. |
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Risk |
Description |
Potential impact |
Mitigation |
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3. LIQUIDITY |
Our financial strategy is to reduce our debt below £1 billion. The UK economy is likely to go into recession as a result of high inflation, rising interest rates, rising costs in energy and a fall in consumer confidence.
Consumers will reduce spending as the economy goes into recession and as prices rise. The cost of living crisis created uncertainty regarding consumer behaviour. While in previous recessions pubs have remained attractive and affordable, this might not always be the case. |
The liquidity of the business could come under strain as a result of economic pressure on the pub sector, particularly if rising prices cannot be passed on to consumers. |
• Seek further covenant amendments to avoid an expected covenant breach at 31 December 2022 • Seek to increase the banking facility through an amend and extend agreement • Reduce debt • Conserve liquid funds by reducing costs • Maintain strong relationships with financial backers • Lobby Government on the importance of the pub trade to the UK economy • Plan for resilience within our financial model to cover an economic downturn |
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Movement - No change in risk COVID-19 is no longer the immediate threat that it has been in the last few years. The economy in the UK is weakening, and consumer confidence is falling. The Group can mitigate the impact of this by reducing costs, keeping its offering to guests attractive and affordable. |
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Linked opportunity The movement in the economy can stimulate a change in the marketplace as higher-priced or less attractive operators are forced out and creates opportunities to stand out to our guests. |
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Risk |
Description |
Potential impact |
Mitigation |
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4. HEALTH AND SAFETY, FOOD SAFETY |
The safety of our guests, our people and the public is fundamental to our activities. We seek to attain the highest levels of safety across our estate. Lapses of safety damage the trust and reputation of the business.
The provision of accurate and reliable information on food, to our guests, is paramount. Our guests trust in our high standards of food hygiene, food preparation and quality.
Breaches of health and safety regulations and food standards attract media attention and high penalties.
Public concern over allergens still remains high. 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. |
• Financial penalties • Significant damage to reputation • Increased business complexity impacting upon our guests' experience |
• Embedded health, safety and hygiene management systems • Dedicated safety advisers for our pubs seeking continuous improvement • Regular independent expert safety audits • Training of team members including e-learning modules on specific risks, such as allergens, for completion by all front and back of house team members • Escalation of potential safety threats to senior operational management • Maintaining excellent levels of compliance through policies, training and monitoring • Working with our supply chain to maintain accurate records identifying the constituent food ingredients and allergens of our meals • Due diligence on accepting new suppliers, monitoring and tracking all suppliers • 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
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Movement - Decreased The continued development of our food information system has given us the ability to collect and provide more detail to our guests. The risk remains significant because of the wide variety of food items we source, and levels of food intolerance amongst the public. When our systems or practices are found to be at fault, we confront any failing honestly, in order to learn and build better safeguards for the future. |
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Linked opportunity In a competitive marketplace there is an opportunity to build a reputation for absolute commitment to guest care and building long-term trust. |
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Risk |
Description |
Potential impact |
Mitigation |
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5. FINANCIAL COVENANTS, PENSION FUND DEFICIT, AND ACCOUNTING CONTROLS |
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.
Breach of the covenants with our lenders.
Incorrect reporting of financial results.
The pension deficit might increase if investment yields fall.
Unauthorised transactions, failure of accounting controls or overridden.
Greater responsibility to report on control effectiveness as a result of the Government's white paper on 'Restoring Trust in Audit and Corporate Governance'. |
• Reputation damage and additional financial operating restrictions imposed by lenders • Loss of investor confidence
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• 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 • Controls improvement programme underway to meet future regulation anticipated from the Government's white paper on 'Restoring Trust in Audit and Corporate Governance'. |
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Movement - No change in risk There are strong controls mitigating this risk to a low level. The impact on our covenants is reduced by clear communications to, and engagement with, our lenders which explains the financial impact of the lockdowns in recent years and the trading conditions. |
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Linked opportunity To further strengthen our relationships with our bondholders, communicating information on the business and the impact of decline in consumer confidence upon our sector. |
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Risk |
Description |
Potential impact |
Mitigation |
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6. POLITICAL AND ECONOMIC |
Changes to Government policy impact upon the cost base for operating pubs, either positively or negatively. At the same time, economic factors such as the current period of inflation and high demand for certain commodities and products, also impacts our operating costs and those of our supply chain. Legislative changes also impact business, particularly in recent times the move to decarbonise the economy. It remains uncertain how successful the Government and the Bank of England can be in curbing inflation pressure in the year ahead and what the impact will be on consumer confidence.
There is a risk that inflation continues to rise, leading to higher interest rates, increased unemployment, and low consumer confidence. The UK as well as many other countries is at a risk of a deep recession, exacerbated by high energy costs and shortages of commodities. |
• It may be harder to secure long-term agreements with our suppliers while prices rise and shortages of some commodities or products exist |
• To constantly review the positioning of our guest offer at the right price point, to maintain or grow margin whilst remaining competitive • Continue to lobby Government on matters that are likely to restrict trade or increase costs • Continually assess our supply contracts and renegotiate terms when they fall due • Where feasible, work with our key suppliers to hold sufficient stocks in the UK to cover short-term disruption • Consider alternative sources of supply if our suppliers have trouble importing goods • Financial forecasts stress tested based on reduced revenue as a result of an erosion in consumer confidence |
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Movement - Increased Inflation impacts the cost base for our business as well as our suppliers and our partners. At the same time our guests have less money to spend, which makes a recession more likely in the UK. |
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Linked opportunity Pubs normally remain very competitive when prices are rising in the economy. They are perceived as an affordable treat offering an experience which can be flexed to suit demand, for instance offering greater value for money over quality or the range of choice. Our ability to track and react quickly to changes in preference could offer a competitive advantage. Our scale of operations and long-term stable relationships with suppliers could also help us control costs better than competitors. |
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Risk |
Description |
Potential impact |
Mitigation |
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7. INFORMATION TECHNOLOGY
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Our business activity is reliant upon our 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. The cyber threat has increased in recent years targeting vulnerable businesses with data theft, data encryption, denial of service and fraud. Marston's handles the personal contact details of many of its guests who opt to use the Wi-Fi or sign up to receive mails. In addition, the Group retains the employment data for a large number of people.
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. The risk extends to the companies that we share data with for processing or storage on our behalf. |
• Reduction in the effectiveness of operations, business interruption and loss of profit • Regulatory fines as a result of the loss of data • Reputational damage due to a loss of data |
• Anti-virus and firewall protection • Access control, password protection and IT policy adherence • Network and device controls and monitoring • Penetration testing and remediation • Cyber defence testing • 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 |
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Movement - No change in risk Global cyber risk has evolved in recent years, particularly the exploitation of vulnerable companies that may have less defence but exist within supply chains sensitive to disruption. Cyber criminality has, in recent years, sought to take advantage of stretched supply chains and the increase in homeworking to exploit gaps in corporates' cyber defences. |
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Linked opportunity Our digital engagement with guests is greatly valued by them, whether it's to book a table or a room, receive offers by email or order a meal. Keeping our guests' confidence allows us to take advantage of these tools and have the confidence to innovate new ways to engage and market our business digitally. Our internal controls are continually enhanced by digital tools including, in recent years, our analysis and reporting of sales data, team planning, recruitment, concessions and food information. |
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Statement of Directors' responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they have elected to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law and have elected to prepare the parent Company financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the Group's profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable, relevant, reliable and prudent;
· for the Group financial statements, state whether they have been prepared in accordance with UK-adopted international accounting standards;
· for the parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
· assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal controls as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
· the Strategic Report/Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
· We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Disclosure of information to Auditor
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
ANDREW ANDREA HAYLEIGH LUPINO
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
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