Thu 14th May 2015 - Ralph Findlay – 'average profits per pub up 30% at Marston's since 2012' Ralph Findlay – ‘average profits per pub up 30% at Marston’s since 2012’: Marston’s has seen average profits per pub rise 30% since 2012 as a consequence of its new-build programme and the disposal of 500 smaller pubs, the company’s chief executive, Ralph Findlay, told Propel this morning. In an interview after the announcement of the company’s interim results, Findlay said: “In terms of the implementation of our strategy, we’re on track with new-builds, so we will open 25 this year. We’re on track with disposals – by the end of this year we will be pretty close to the end of the disposal process that we’ve been following or the past two years, so there shouldn’t be a significant number of disposals after the end of 2016. The evolution of that estate has had two principal effects for our business. One is that the average profit per pub for the first half of this year as a consequence of building news pubs and selling smaller, less profitable pubs, and converting pubs to franchise was up by 17%. Since 2012 we’ve increased average profits per pub by about 30% as a consequence of that estate plan. The second consequence is that we have just had a revaluation of the estate and that has produced an overall surplus of £54m. The investments we are making in new-builds are clearly adding value.” Overall, Findlay said, “it was a good first half year and key elements of that were like-for-sales growth in our destination and premium estate and in our Taverns community pubs both at 1.5%, against strong comps the previous year – in 2014, for example, we had been up 5.7%, so we’ve made further good progress on that number. The second point is that we have achieved that while at the same time increasing our operating margins. So overall that’s been a strong result for our pubs business. Our brewing business has also performed well, with volume up 4% and turnover and profit ahead of last year, so all of that has contributed to profits growth of 2% before tax. It is worth noting that there are two headwinds we have overcome in the first half, one is the impact of disposals, which affected our results by about £3m, the second is an accounting charge of about £2m relating to the pension scheme. If you strip out both of those things, our underlying trading is currently running at 15% ahead of last year in terms of profitability. We’ve see going into the second half of the year an improvement in that trading position, so current like-for-likes are running at 2% in our Destination estate and 2.8% in our Taverns estate, so there’s been some increase in the rate of our sales since the end of the first half-year.” The company is currently about 500 pubs smaller than it was at its peak, Findlay said, and on average about a third of the pubs it has been selling have continued to be pubs. Profits have been increasing from leased estate, he said: “We’ve got a very good quality leased estate, quite a food-led business, which is trading well, we’ve made a small number of disposals from it in recent years, part of the 500 pubs that we’ve sold, and the consequence of that is that all the key metrics are much stronger than they were two or three years ago: 90% licensee stability, very low bad debt.” On acquisitions, he said: “We don’t comment on any particular things, but we look at potential acquisitions that are consistent with our strategy and which can contribute to our return on capital. We have had a strategy over the past five years that’s not been reliant on acquisitions, though we’ve made them when it’s been opportunistic to do so, such as the acquisition of the Thwaites brewing business, which we completed in April this year. But the overall strategy has been an organic one, so we’ve been investing approximately £80m a year in building new restaurants since 2009. We’ve got good visibility on our pipeline out to 2017, so our current plans are to maintain our rate of growth. If we look forward, there will be a slight increase of investment in certain areas, so I expect that we will do more lodges. We’ve got three lodges opening this year, and I expect from next year that will increase probably to about five a year. I also expect that we will expand our premium pubs business, which is Pitcher & Piano and Revere, probably by about one to two sites per annum, in addition to conversions from the existing estate.” On the brewing side, Thwaites beers are now available to licensees across the estate, and Marston’s will again continue to look for “opportunistic” purchases if they come up. “Choice is where the market is at,” Findlay said. “Range is something you simply have to have, both for licensees and their customers, and I think we’re in the fortunate position of having an incredibly strong beer range from the various breweries that we’ve got. It’s a strategy that is undoubtedly working.”