Marstons to axe over 2,000 jobs ahead of major cost overview

Pub and brewery group, Marston's has announced it will cut up to 2,150 furloughed jobs following new restrictions to curb the spread of the coronavirus.

The company stated, 'Inevitably, and regrettably, recent restrictions will impact jobs. Since the start of the pandemic, our objectives have included protecting the health and livelihoods of our teams.

'Government support over the summer was vital, and around 10,000 colleagues have so far returned to work. However, because of the recent additional restrictions, we have reluctantly concluded that around 2,150 pub-based roles currently subject to furlough are going to be impacted.

'Furthermore, we have initiated a full review of overhead costs, which will be concluded by the end of December.'

The news was part of the group's year end trading update for the 53 weeks ended 3 October 2020, which showed that group sales for the year stands at £821m, 30% below last year.

Total pub sales for the year were £515m, 34% below last year, principally reflecting the closure period and the impact of the disposal of 168 pubs for proceeds of £61 million in the first half-year.

In Marston’s Beer Company, sales for the year were £306m, 22% below last year. Off trade volumes for the year were up 23%, driven by exceptional demand during the period of pub closure. On trade volumes (excluding the closure period) were 11% below last year.

Since 4 July, the group had reopened approximately 99% of its pubs by the year end, though a small number closed subsequently as revised regulations were introduced in Scotland. Managed and franchised like-for-like sales averaged 90% of last year over the 13-week period to 3 October.

This represents outperformance of approximately 7% relative to the UK pub sector (CGA Peach Tracker) over the 13-week period, principally reflecting the benefits of our balanced pub estate of wet- led and food-led pubs, which are predominantly suburban, and community based, with limited exposure to city centres and only three pubs in Central London.

Marston's estimates that social distancing and other restrictions reduced average indoor capacity by approximately 30% in this period, although this was mitigated by the fact that most of its pubs have beer gardens.

The company is investing £2m in 'Inside-Out; schemes including heated and weather-proofed structures to extend the use of outdoor space into the winter months, which will provide additional capacity of around 15,000 covers.

On 12 October, the UK Government introduced a '3 Tier’ system of guidance depending upon rates of infection and perceived risk in different parts of England. Within the estate, Marston's has 21 pubs in Scotland, of which 8 are currently closed, and has 18 pubs in the 'highest risk' Liverpool region, the majority of which serve food and under the existing guidelines are capable of remaining open.

Throughout the pandemic the firm has offered continuous help to those tenants and lessees impacted by trading restrictions in the form of rental support and discounting, and it anticipates a continuation of this support in those pubs directly impacted.

CEO Ralph Findlay said, “This year has been testing on many fronts, predominantly from having to navigate the consequences of COVID-19. Despite this, we have also created an exciting new joint venture between Marston’s Beer Company and Carlsberg UK during the period. I am grateful to all at Marston’s for their support, resolve and commitment during this time.'

Findlay went on, “On reopening, we set ourselves three objectives: for pubs to be safe for our guests and our people, to retain pub ambience, and for our pubs to be financially viable. I believe we have met those objectives. Trading has been difficult, but to operate at 90% of last year on a like-for-like basis is better than our forecast, ahead of the market and a highly creditable result.

'In part, this is because most of our pubs are in suburban or community settings, and we have relatively few pubs in city centres which have been worst hit by changes in working habits. However, the additional restrictions which have been applied across the UK most recently present significant challenges to us and will make business more difficult for a period of time.

'I very much regret that the consequence of this is that the jobs of around 2,150 of our colleagues will be impacted, but it is an inevitable consequence of the limitations placed upon our business. We will be looking at our cost base further in the coming weeks.'

Findlay continued, 'We have managed our cash flow very carefully and it is a credit to our teams that net debt is £70 million below where it was at end of the Financial Year 2019 and £50 million below the Interim 2020 level despite the 15 weeks of pubs closure.

'Strategically, the transformational deal with Carlsberg has highlighted the inherent appeal and value of Marston’s Beer Company and will contribute to a further reduction in net debt when it completes at the end of October. We look forward to seeing the Carlsberg Marston’s Beer Company grow, realising the significant benefits set out at the time the joint venture was announced.

'There is much uncertainty ahead, the majority of which is outside of our control, however we will continue to focus on the safety of our teams and guests.'

Findlay finished, 'Looking beyond the immediate challenges, we look forward to our future as a focused pub operator, returning to growth when trading conditions allow and realising the opportunities which are open to us over the medium to longer term. “