Pubs group highlights cost pressures

Marston's today warned that costs relating to food, energy and brewing materials were set to increase by around £12 million in the coming year.

The Pitcher & Piano and Two for One owner highlighted the pressure as it reported a 2 per cent rise in turnover for the financial year to 4 October.

The company's managed pubs division saw a like-for-like sales drop of 0.6 per cent, but Marston's estimated it would need growth of 3 per cent in the current financial year to achieve a similar level of operating profit in the division.

It plans to offset a "significant proportion" of the increases through better sourcing, in addition to a recent head office reorganisation.

As well as general costs, Marston's said it faced a higher duty burden.

It said: "Pubs are subject to comprehensive regulation and are supervised by trained staff committed to the responsible retailing of alcohol.

"However, recently introduced legislation and increases in taxation have increased the commercial pressures on pub operators and their tenants and have contributed to an increasing alcohol price differential between pubs and the off-trade."

The company described current trading conditions as testing and said the amount of support offered to tenants and lessees in its Marston's Pub Company division increased to around £2 million. Measures available include rent alleviations, discounts and assistance in reducing costs.

Like-for-like profits for the division were 1.7 per cent below last year, which Marston's said reflected poor summer weather and weaker consumer confidence.

Marston's is also the UK's largest brewer of premium cask ales, including Marston's Pedigree and Jennings Cumberland Ale. It operates four breweries - Banks's Brewery in Wolverhampton, Marston's Brewery at Burton on Trent, Jennings Brewery at Cockermouth in the Lake District and Ringwood brewery in Hampshire.

Volumes of own brewed beers increased by 5 per cent in the last financial year, helped by the recent acquisitions of the Ringwood and Wychwood breweries.

Mark Brumby, an analyst at Blue Oar Securities, described today's trading update as reassuring.

He said: "The group's numbers go a long way to prove that its business model is resilient and that the company is well-placed to trade profitably through the current difficult market."