Marston's looks to cut debt amid 'uncertain times'

Pubs and beer company Marston’s is scaling back expansion plans as it seeks to shave £200m off its net debt during “increasingly uncertain times”.

Marston's said there would be a reduction in new-build investment to around £25m a year from 2020 onwards, with investment weighted towards pubs with accommodation “where we are seeing the strongest returns”. It will also seek to dispose of between £80m and £90m of non-core assets by 2023.

Marston’s said the cash would be used to reduce net debt to £1.2bn by 2023.

Ralph Findlay, chief executive, said: “We operate in increasingly uncertain times from a political and macroeconomic perspective, and as such, we remain cautious about the potential consumer outlook until there is more clarity.

“However, we are confident of delivering further growth this year, while focussing on our strategic priorities of generating cash and delivering our stated £0.2bn debt reduction between 2020 and 2023.”

Marston’s also updated on trading for the 16 weeks to 19 January, which saw total pub like-for-like sales supported by a strong Christmas. The festive fortnight reported underlying sales of 5.7% whereas sales for the full 16 weeks were ahead just 1.4%.

Its food-focused Destination and Premium arm reported just 0.5% growth over the period, though its wet-led Taverns arm fared better, with like-for-like sales ahead 3.2%.

Marston’s Beer Company, the brewery division, reported total volumes up 3.5% and own-brewed and licensed volumes ahead 2.5%.

Paul Hickman, analyst at Edison Investment Research, said: “Marston’s is trading in a tightly competitive market and there was weakness in its Destination and Premium division, where considerable investment has been made over recent years in food-led pubs. Like-for-like growth of only 0.5% is insufficient to counter expected costs increases.

“As a result it is understandable that Marston’s is announcing cash conservation measures to reduce net debt.

“This is a company that priorities its dividend and although these cash-saving measures will tend to limit future growth, they should serve to protect the consistency of the pay-out for which Marston’s has a well-deserved reputation.”

MARS shares were down more than 3% to 99.05p on Wednesday morning, having rallied 14% since just before Christmas.