Martsons results show £40m COVID-19 loss ahead of reopening

Pub giant Marston's has today posted interim results for the 26 weeks ended 28 March 2020, as it plans for 4 July reopening.

The highlights are as follows:
• Pre-COVID-19 revenues in line with last year
- COVID-19 had a material impact on revenues estimated at c£40m, with underlying revenue falling from £553.1m to £510.5m over the same period.

• Net cash flow improvement of £55m reflecting progress on debt reduction plans
- Achieved despite COVID-19 impact on earnings
- Includes £61m disposal proceeds through sale of 168 pubs.

• Additional liquidity secured and covenants amended beyond end of financial year
- £70m additional facility to November 2020; £118m headroom on facilities
- Covenant amendments and waivers on all finance facilities
- Cash burn of £10m per month in closure period following swift action on cost reduction
- Cash flow supported by very strong off-trade sales – up 55% since half year

Outlook
• Transformational joint venture transaction
- Long-term joint venture between Marston’s Beer Company (MBC) and Carlsberg UK
- Retain 40% stake in a high quality beer business with significant synergy opportunity
- Receive up to £273m equalisation payment – valuing MBC at £580m
- Proceeds used to further reduce debt, target ongoing cash flow broadly cash neutral
- Transaction approved by shareholders 25 June and expected to complete in Q3 2020, subject to competition clearance

• Well placed for post COVID-19 recovery in medium term
- Plans in place for pubs to reopen from 4 July, initial revenue and earnings profile uncertain
- Transaction significantly strengthens balance sheet
- Predominantly freehold pub estate, located outside city centres with 90% having outside space
- Well placed to benefit from likely supply contraction in sector and gain market share
- Management will have total future focus on operating its pubs and accommodation business
- Capital markets day in autumn to present pub strategy

Ralph Findlay, CEO said, “Our immediate priority is to prepare our pubs to reopen on 4 July. Whilst there is short term uncertainty as the sector emerges from lockdown, we are focused on offering a great guest experience, synonymous with Marston’s hospitality, to welcome our customers back into our pubs within a safe trading environment.

“The challenges facing the sector should not be underestimated and much rests on consumer confidence which may take time to rebuild. As the industry navigates its way out of lockdown,we will continue to urge Government for continued support for pubs and wider hospitality, through the reopening phase and thereafter through business rates relief and cuts to VAT, to protect jobs, the economy and the invaluable role the pub plays in communities nationwide.

“Looking ahead, our transformational deal with Carlsberg positions the Company well for the future. Post completion, Marston’s will be a focussed pub and accommodation business with a significantly strengthened balance sheet, well placed to rebuild trading momentum and leverage the market opportunities available to us over the medium to longer term.”