Profit/(loss) before tax£27.7m£(101.3)m£163.4m£(171.1)m
Net profit/(loss)£27.5m£(86.2)m£137.2m£(128.3)m
Earnings/(loss) per share4.3p(13.6)p21.7p(20.3)p
Net cash inflow/(outflow) incl. IFRS 16£26.2m£118.1m£26.2m£118.1m
NAV per share£1.02£0.64
1 From continuing operations.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
18
GROUP OPERATIONAL AND FINANCIAL REVIEW CONTINUED
Performance and financial review
Interest
Our borrowing is largely long-dated and
asset-backed. The securitisation is in place
until 2035 which provides financing security
and high visibility of future cash flows; this is
ofparticular importance in an environment
where interest rates are rising to curb
inflation. The securitisation is fully hedged
until 2035. Other lease related borrowings are
index linked, capped and collared at 1%–4%,
providing protection against high inflation.
Ofour £280 million bank facility, £120 million
isnow hedged. Overall, we are 90% hedged,
providing significant protection against
changes in interest rate movements that may
occur during the year.
Since the financial year end, the £60 million
forward floating-to-fixed interest rate swap
which was due to take effect from April 2025
was brought forward and started in
October2022.
Taxation
Underlying profit before tax was £27.7 million
(2021: loss of £(101.3) million from continuing
operations), upon which the total underlying
tax charge was £0.2 million (2021: credit of
£15.1 million). This gives an underlying rate of
taxation of 0.7% (2021: 14.9%). The effective
taxrate is lower than the standard rate of
corporation tax primarily due to super-
deductions, post-tax share of income from
associates and a credit in respect of deferred
tax on property.
The total tax charge is £26.2 million
(2021:creditof £42.8 million) on total profit
before tax of £163.4 million (2021: loss of
£(171.1)million from continuing operations),
with aneffective tax rate of 16%.
Total tax contribution in 2021/22
VAT – £75.1m
Employee payroll taxes – £35.0m
Business rates – £27.9m
Employer payroll taxes – £15.5m
Other – £3.8m
Corporation tax – £0.0m
£157.2M
Non-underlying items
There is a net non-underlying credit of
£135.7million before tax and £109.7 million
after tax. The credit primarily relates to a
£109.2million net gain in respect of interest
rate swap movements and a net reversal of
impairment of £21.6 million to the freehold
and leasehold property values following the
external estate valuation of the Group’s
effective freehold properties and the
impairment review of the Group’s leasehold
properties undertaken during the year.
Other non-underlying items comprise a
£0.7million charge in respect of the fair
valueof the contingent consideration
fromthe disposal of the Group’s brewing
operations and a £5.6 million credit for VAT
claims submitted to HM Revenue & Customs
inrespect of the VAT treatment of gaming
machines from 1 January 2006 to 31 January
2013. An explanation of non-underlying items
is included within note 4.
The tax charge relating to these non-
underlying items is £26.0 million.
Earnings per share
Total earnings per share were 21.7 pence per
share (2021: 25.7 pence per share). Underlying
earnings per share were 4.3 pence per share
(2021: (13.4) pence loss per share).
Capital expenditure and disposals
Capital expenditure was £70.1 million in
theyear (2021: £46.6 million). We expect that
capital expenditure will be around £65 million
in 2023. Included in this year’s expenditure
isthe refurbishment of our new head office,
St Johns House, which was largely completed
during FY2022 but will be financed in FY2023.
Proceeds of £9.9 million have been realised in
relation to the disposal of non-core pubs and
unlicensed properties, which achieved a 40%
higher price than the net book value.
Property
The Group has moved to annual external
valuations of its properties and all pubs
willbe inspected on a rotational basis, with
approximately one third of the estate being
inspected each year and the remainder
subject to a desktop valuation. Christie & Co
undertook an external valuation in July 2022
and the results have been reflected in the full
year accounts.
The carrying value of the estate is now
£2.1billion and, as a result of the valuation
andleasehold impairment review, there is
aneffective freehold impairment reversal
of£88.4 million and a leasehold impairment
reversal of £5.0 million, giving a £93.4 million
increase in net book value. The average
multiples used in the valuation were towards
the lower end of our expectations and the
multiples disclosed by both peers in their
valuations and recent comparable
transactions.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
19
GROUP OPERATIONAL AND FINANCIAL REVIEW CONTINUED
Performance and financial review
Share of Associate (Carlsberg
Marston’s Brewing Company (CMBC))
The income from CMBC of £3.3million
(2021:loss of £(14.5) million) reflects the
Group’s share of the statutory profit after
taxgenerated by CMBC in the period.
WhilstCMBC’s results show a recovery from
last year, they also reflect the impact of the
Omicron variant during the year; H1 saw
anoperating loss of £(2.0) million.
Dividends from associates of £19.4 million
werereceived (2021: £nil), primarily resulting
from one-off working capital movements.
Dividends for this financial year were forecast
to be £nil at the time of our interim results due
to the significant disruption to trading in the
year (including the impact of Omicron) and
the potential for continuing uncertainty
asaresult of cost inflation, uncertainty
resultingfrom the war in Ukraine and the
macroeconomic environment. However,
weremain confident that there will be regular
future dividends from CMBC when there is a
return to more normalised market conditions.
Pensions
The balance on our final salary scheme was
a£15.1 million surplus at 1 October 2022 which
compares favourably to the £14.4 million
deficit at last year end. This improvement
hasbeen primarily driven by the increase
inthe discount rate assumption, from 2.0%
inOctober 2021 to 5.2% in October 2022,
reflecting the increase in corporate bond
yields since the year end, partially offset by
reductions in asset values. The net annual
cash contribution is c.£6m and is only
expected to continue for the next 2–3 years.
Debt and financing
The Group remained focused on cash
management during the year, particularly
during periods where trading was impacted
by the Omicron variant. We continued to
prioritise cash preservation throughout
thedisrupted trading period, but also
maintained an appropriate level of pub
investment to ensure our pubs were well
positioned to deliver our strategy.
The Group generated a net cash inflow for
the period of £26.2 million including IFRS 16
(£17.7 million excluding IFRS 16). This would
have been £48.2 million excluding the net
outflow of £22.0 million for the one-off
payments outlined in our interim results
relating to deferred duty/VAT and the
CMBCcontingent consideration.
Net debt, excluding IFRS 16 lease liabilities,
was £1,216 million, a decrease of £16 million
from last year (2021: £1,232 million). Total net
debt of £1,594 million (2021: £1,604 million)
includes lease liabilities of £378 million
(2021:£372 million).
There was an operating cash inflow of
£134.0million in the year, significantly
aheadof last year (2021: £34.7 million),
principally reflecting higher profits in
theyear.
The Group has a range of medium
andlong-term financing providing an
appropriate level of flexibility and liquidity
forthe medium term: a £280 million bank
facility to March 2024 – at the period end
£215 million was drawn providing headroom
of£65million and non-securitised cash
balances were £10 million; a £40 million
private placement in place until 2024;
aseasonal overdraft of £20 million from
25January to 6 May and 1 July to 12 August
each year reducing to £5 million for the
remainder of each year – which was not used
at the period end; a long-term securitisation
of approximately £655 million – we satisfied
the scheduled repayments demonstrating
solid cash generation even under trading
restrictions in Q1 and, at the period close
there is £15 million of the £120 million
securitisation liquidity facility utilised;
long-term other lease related borrowings of
£338 million; and £378 million of IFRS 16 leases.
The securitisation is fully hedged to 2035.
Additionally, the Group’s mark-to-market
position on its interest rate swaps has reduced
substantially in view of interest rate rises.
Otherlease related borrowing is index-linked
capped and collared at 1% and 4%. There are
£120 million of swaps against the bank facility:
£60 million is fixed at 4% until 2031 and
£60million is now fixed at 3.45% until 2029.
In the 2021 financial statements it was
highlighted that the Group would require
further amendments to its covenants in
financial year 2022. The Group was granted
the required waivers or amendments to its
financial covenants across the lending banks
and private placement provider; these were
required due to the continued recovery from
COVID-19 and theimpact of Omicron in H1.
Theamended covenant tests were met.
Nosecuritisation waivers or amendments
were required.
We continued to receive strong support
fromour stakeholders for amendments and
worked in acollaborative approach, helped
by open andconstructive dialogue in a
period of uncertainty, which underlines the
importance of good, long-term relationships
with all our stakeholders, and we thank them
for their continued support.
The Group is in positive discussions with
itslending banks and private placement
provider to agree further covenant
amendments covering FY2023 before
31December 2022; these are required due
tothe continued recovery from COVID-19
andimpact from Omicron in H1. Given our
experiences to date we are very confident of
securing these where necessary. This has been
disclosed as a material uncertainty in the
financial statements.
In summary, we have adequate cash
headroom in our bank facility to provide
operational liquidity. There is also a £120
million liquidity facility in the securitisation to
protect bondholders in the event of a default
– this equates to 18 months of debt service
payments. £15 million is currently drawn on this
and is included in the above £655 million.
Importantly, over 90% of our medium- to
long-term financing is hedged, thereby
minimising any exposure to interest rate
increases that may arise over the next
fewyears.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
20
SECTION 172(1) STATEMENT
Stakeholder considerations play an
important part in the Board’s discussions
and decision-making process.
Stakeholder interests help shape our
performance and, in doing so, promote
the long-term success of the Company,
as set out in this statement.
During the period ended 1 October 2022, the
Board has acted in accordance with section
172(1) of the Companies Act 2006 (the ‘Act’).
Each Director of the Board has acted in a
way they consider, in good faith, to promote
the long-term success of the Company for
the benefit of its members. In doing so, the
Directors have had regard to the interests
ofthe stakeholders and factors set out
insection 172(1) (a) to (f) of the Act.
Thisincludes the interests of our investors,
employees, Pub Partners, suppliers and
guests, and the impact our pub estate has
onthe environment and the communities
weserve, whilst maintaining high standards
of business conduct.
The Board recognises the value of engaging
with stakeholders to understand their views,
objectives and interests so that they may be
properly considered in the Board’s decision-
making. Each Director is mindful of their
directors’ duties and, this year they received
refresher training on those duties and the Act.
Details of our key stakeholder groups,
andhow the Company and the Board
haveengaged with them during the year,
are set out in the Stakeholder Engagement
section on pages 21 to 23. Stakeholder
engagement takes many forms including
direct engagement with our investors, guests
and employees and indirect engagement
through regular presentations and reports
from the Executive Directors, the Executive
Committee and senior management.
Direct employee engagement is conducted
through Bridget Lea, our nominated Non-
Executive Director for Workforce Engagement,
and the Board regularly receives a summary
of the results of our monthly employee
engagement surveys, from the HR Director.
Pub visits, regular days ‘in trade’ and Board
dinners provide an additional opportunity
forthe Board to engage directly with our
employees and Pub Partners in a less formal
setting. In addition, the Directors engage
directly with our investors. Engagement with
our suppliers, guests and other stakeholders
takes place at an operational level through
the relevant senior manager with the Board
receiving updates via the Executive Directors.
Finally, our ‘Doing more to be proud of’
initiative oversees stakeholder engagement
on behalf of the Board on Environmental,
Social and Governance (ESG) matters and
further details are set out on pages 24 to 25.
The interests of employees, investors and other stakeholders are taken into account by the
Board in all decision-making but particularly so when considering matters of strategic
importance. Examples of some of the principal decisions that have been taken during the
year and how Section 172(1) considerations have been factored into the Board’s decision-
making are set out below.
Board decisionSection 172 dutiesBoard discussionRead more
In March 2022, the Board
approved covenant waivers
and amendments to the
Company’s revolving credit
facility agreement dated
7March 2017 and is in
discussions to agree further
amendments for 2023.
Consequences of
decisions in the
long-term.
• Consideration of the financial
stability of the Group and its
long-term sustainability for the
benefit of all stakeholders.
Page 19
In January 2022, the Board
unanimously agreed a
move away from being a
National Minimum Wage
(NMW) employer.
The interests of a broad
range stakeholder
groups, including the
Company’s employees,
guests and the
Government.
• Consideration of and benefit
tothe Company’s employees
• The benefit to the long-term
success of the Company as
aconsequence of improved
employee retention rates and
avoiding the volatility of the
labour market.
• The positive impact on
guestsatisfaction as a result
ofimproved speed of service
andmore experienced and
engaged pub teams.
• Supporting the Government
and wider community by
contributing to economic
growth.
Page 32
In October 2021 the Board
were presented with, and
considered, our ESG targets
for Net Zero and food
waste.
The impact of
theCompany’s
operations on the
community and
theenvironment.
The interests of guests
and employees.
• Linking the Company’s
strategy with its ESG strategy,
which will benefit a broad
range of stakeholders.
Page 24
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
21
STAKEHOLDER ENGAGEMENT
Our people
Our Pub Partners
Priorities
• Pay, benefits and conditions
• Clear, concise communication
• Support, training and development
• Wellbeing, diversity and inclusion
Priorities
• Support, training and development
• Operational success and growth
• Reward and recognition
Our people are the heart of our business. Effective employee engagement is central to our
strategy and we recognise that the quality and commitment of our people is integral to our
long-term success. Achieving an engagement score of 8 or more on our employee engagement
survey is one of our Key Performance Indicators (KPIs). We recognise the importance of having an
open relationship with our workforce and investing in tools that empower them to have their say.
We have around 976 pubs that are operated by self-employed Pub Partners under several types
of franchise-style agreements, each providing flexible operating models. Most recently, in 2021,
we launched the innovative Pillar Partnership. As with all our franchise-style models, other than
labour, most of the operating costs (such as energy bills and other utilities) are paid for by
Marston’s, allowing our Pub Partners to focus on running their business and giving guests
thebestpossible experience.
How the Board has engaged
• All employees are invited to express their
views on a confidential basis by completing
the Peakon employee engagement surveys.
The Board receives a monthly report on the
aggregate engagement score and key
themes, and outputs from the surveys are
discussed throughout the year.
• Bridget Lea is our designated Non-executive
Director for Workforce Engagement with
ourworkforce. We were pleased to resume
our programme for employee engagement
this year, following the disruption caused
byCOVID-19. Unfortunately, the planned
‘inperson’ engagement session coincided
with the funeral of Queen Elizabeth II, so the
session was rearranged for the following
month (October 2022) and hosted digitally
toensure that the majority of the original
employees were still able to attend. Bridget
and Octavia Morley, Senior Independent
Director and Chair of the Remuneration
Committee, conducted the engagement
session supported by our HR Director. During
the session, there was an opportunity for
employees to ask questions and provide
feedback on the strategy and the following
How the Board has engaged
• As part of the suite of training and support
available to them, our Pub Partners receive
complementary access to the employee
engagement survey operated by Peakon.
This enables Pub Partners to share their
views and help shape their experience
atMarston’s. These scores are included
inthe monthly reports seen by the Board.
key topics were discussed: the Directors’
Remuneration Policy, communication
andcollaboration between teams, and
alignment of incentive schemes through
thebusiness.
• The Board received presentations from the
HR Director and his team on a number of
workforce related matters including the
People Promise, which has been developed
and refined following feedback from focus
groups from a cross-section of our
workforce.
• The Board met with a number of senior
managers and Pub Partners during the
year, through presentations at Board
meetings, Board dinners and visits to our
pubs, including a day ‘in trade’ for the
whole Board visiting a number of sites in
Wales we acquired as part of the
transaction with SA Brain.
• The Board receives separate monthly
reports from our Operational Directors for
food-led and for drink-led pubs and these
reports include information on our Pub
Partnerships.
• The CEO and CFO, together with our
Leadership Group and Operational
Directors, participate in direct engagement
with our Pub Partners throughout the year
by frequent visits to pubs and days in trade.
READ MORE ON PAGE 60 READ MORE ON PAGE 34
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
22
STAKEHOLDER ENGAGEMENT CONTINUED
Our guests
Our suppliers
Priorities
• Speed of service
• Quality of food and drink
• Atmosphere and experience
• Value for money
Priorities
• Long-term supply partnerships
• Clarity around our strategy, objectives
and sustainability agenda
• Fair and transparent procurement and
business processes
We truly are ‘guest obsessed’ and we
consider the voice of our guests in almost
everything we do. Being loved by our guests
and achieving a Reputation score of 800 or
more, is one of our KPIs.
Reputation generates a score for each of
ourpubs based on guest feedback across
multiple channels and platforms, such as
Google and TripAdvisor. This enables us to
measure guest satisfaction, listen to what our
guests’ priorities are and where there is
scope for us to improve or refine our offer.
Our suppliers play an important role in
helping us deliver our strategy and providing
our guests with the best possible experience.
We value long-term partnerships with our
suppliers to form strong, sustainable and
trusted relationships whilst minimising risk in
our supply chain.
How the Board has engaged
• The Board receives a monthly report on our
aggregate Reputation score and how this
compares to our competitors. Key themes
and drivers for guest satisfaction taken from
Reputation are presented periodically, at
Board meetings by our Commercial
Marketing Director and her team.
• The CEO and CFO (together with our
Leadership Group and operational
directors) have direct engagement with
our guests throughout the year when
visiting pubs on days in trade.
• The results of qualitative guest focus
groups and quantitative surveys
undertaken in-house by our Guest Insight
team are presented periodically, at Board
meetings by our Commercial Marketing
Director and her team.
How the Board has engaged
• The Board receives monthly updates and
reports from the CFO on any key tenders
and supply chain issues.
• During the year, the CEO and CFO
engaged directly with key suppliers by
participating in meetings and site visits.
• Our CEO and CFO are Non-executive
Directors of CMBC, our exclusive drinks
distribution partner, and provide the
Board with regular updates on supply
chain and other matters in support of our
40% share in CMBC.
The environment and communities
Priorities
• Responsibility and sustainability
• Social value and purpose for our people,
partners and the communities we serve
• The policies and processes we have in
place to protect the health, safety and
wellbeing of our people, guests, Pub
Partners and the wider community
• Reducing carbon emissions and food waste
from our operations
• Leadership and governance, including
transparency in ESG reporting
In line with our corporate goals, we are committed to being a responsible and sustainable
business. We are proud to give something back to the communities we serve and, in doing so,
create value for all our stakeholders, including the planet. Both Marston’s and our Pub Partners
play an active role in our communities, supporting them through charitable endeavours and
generating a positive impact at a local level. We’re committed to doing the right thing and
delivering the objectives set out in ‘Doing more to be proud of’, our ESG initiative. The evolution of
our ESG strategy this year involved us engaging and consulting with a wide range of stakeholders
to understand what ESG topics mattered to them most, including our guests, our people, advisers
and experts and other companies within our sector and beyond.
How the Board has engaged
• The ‘Doing more to be proud of’ working
group oversees stakeholder engagement
on behalf of the Board on ESG matters.
• The Board receives regular updates, reports
and presentations on how the business is
progressing and the initiatives being
undertaken across our business.
• The Executive Committee receives monthly
updates on health and safety and food
safety compliance and, a monthly
summary is provided to the Board, in
addition to the annual presentation from
the Director of Safety.
• The Board received an update on actions
taken during the last financial year to help
eradicate modern slavery, such as our
useof SEDEX to gain access to ethical
information about our suppliers, and
approved the Company’s Modern Slavery
Statement in January 2022.
READ MORE ON PAGE 9 READ MORE ON PAGES 24–40
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
23
STAKEHOLDER ENGAGEMENT CONTINUED
Our investors
Government and regulators
Priorities
• Financial and business performance
• Progress against our strategic objectives
• Macro factors, such as consumer
confidence and inflationary and cost
pressures
• Progress against our Environmental, Social
and Governance (ESG) targets
Priorities
• Creation of jobs and investment
• Long-term sustainable business model
• Payment of taxes
• High standards of business conduct and
compliance
An analysis of our shareholder register by investor type appears on page 168. Engagement with
our shareholders is essential to ensure that we attract and retain long-term investors who support
our strategy. In turn, we strive to ensure that we provide fair, balanced and understandable
information to shareholders and analysts alike, to ensure that they understand and support our
strategy and vision, and have clarity over our financial and non-financial performance.
We take our responsibilities for the health and wellbeing of our guests and employees very
seriously. Our relationships with our Primary Authority, and various other regulatory bodies, help us
to ensure we comply with new and emerging legislation in food and drink, health and safety and
beyond. This is supported by the Company’s Risk & Compliance Committee.
We recognise that Government policy decisions impact our business and all of our stakeholders,
so we engage with Government directly through consultations and working groups, and
indirectly through various lobby groups, including UK Hospitality.
How the Board has engaged
• The Board regularly receives updates
fromthe Chair, CEO and CFO on investor
relations and other shareholder activity
orfeedback.
• Our CEO and CFO have regular face-to-
face meetings with analysts, private client
fund managers and large shareholders.
TheChair and Senior Independent Director
have regular contact with investors and
analysts and are available to meet with
large shareholders.
• The Annual General Meeting (AGM),
ourAnnual Report and Accounts and our
website also provide key communication
channels for our investor community.
Periodic announcements on our business
and financial performance, issued to
thestock market are also available on
ourwebsite.
• Dialogue with shareholder groups and
investors on various topics, including ESG.
How the Board has engaged
• The Board receives regular updates on
labour and resourcing and approved
several initiatives during the last financial
year, including changes to the National
Minimum Wage.
• Our Operational Director for wet-led pubs
met with various Members of Parliament
and the Chair of the All-Party Parliamentary
Group for Beer, and attended the House of
Commons to participate in the statutory
review of the Pubs Code undertaken
byBEIS.
• Our CEO regularly meets, and engages
with, UK Hospitality to discuss sector-wide
matters. Senior managers and operational
directors also engage at a business level
byparticipating in working groups and
consultations. Updates are provided to the
Board in the form of reports and
presentations, from time to time.
• Octavia Morley, our Senior Independent
Director, participated in direct engagement
with our largest shareholders on executive
remuneration, this year.
• An investor relations programme is managed
by the CEO and CFO, in conjunction with our
advisers, focuses on engagement with
institutional shareholders, fund managers,
analysts and private client fund managers.
• On behalf of the Board, the General
Counsel and Company Secretary oversees
communication with private individual
shareholders. The key source of
communication is through the Investors
section of the corporate website, which
provides a wealth of information on our
strategy and vision, links to our share price,
financial calendar, results presentations
and regulatory announcements.
• The AGM provides an opportunity for
shareholders to attend the meeting in
person, to engage directly with the Board
or ask questions in advance.
• Engaging directly with the Pubs Code
Adjudicator and providing bi-annual
reports on Pub Code compliance to
theAudit Committee, in line with our
statutory duties.
• Continued work at a business level with
Public Health England, the Office of Health
Improvement and Disparities (OHID) and
Drinkaware, with any key or strategic
matters being reported to the Board in
theCEO’s monthly report.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
24
RESPONSIBLE BUSINESS
Doing more to be proud of
We are passionate about delivering our
ESG and sustainability strategy: ‘Doing
more to be proud of.’ Whilst there is still
more to do, we believe we can make
meaningful contributions to all our
stakeholders, from cutting carbon
emissions and tackling food waste, to
caring for our people and encouraging
them to grow, and supporting the
communities in which we operate.
Alignment of ESG to our business
At Marston’s we have invested in sustainable
and responsible business practices for many
years, including being amongst the first in our
sector to implement environmental initiatives,
such as zero waste to landfill and the
installation of electric car chargers across our
pub estate. We recognise that there is still
more to do, particularly to help protect the
planet (our most fragile stakeholder). This year,
we have focused on defining our ESG
strategy, engaging and consulting with our
stakeholders to understand what ESG pillars
matter to them most. We have aligned our
ESG strategy to our corporate strategy, and to
how we operate our business. This alignment
has provided clarity of vision, helped establish
ownership, drive improvements and facilitated
improved reporting on the progress that we
have made, and will continue to make.
Previously we relied upon an ESG
Committeeto cover the broad range of
areas collectively referred to as corporate
responsibility. Following engagement with
key stakeholders, given the diverse nature
ofour stakeholder interests, it was clear that
there was an opportunity to better align
those interests with our structure. Our senior
leaders are empowered to engage with
stakeholders at a business and operational
level, and to deliver the part of our ESG and
sustainability strategy that is most closely
affiliated with their individual specialism.
The ‘Doing more to be proud of’ initiative was
developed and three distinct working groups
have been established with a clear mandate,
objectives and targets. Some areas, such as
health and safety and food waste, naturally
have more than one touch point and provide
more opportunities for working together
andharnessing the power of cross-
functionalexpertise.
Progress made by all three working groups is
regularly reviewed by the General Counsel
&Company Secretary, who also has overall
responsibility at Executive Committee and
business level for ‘Doing more to be proud of’
and oversees stakeholder engagement on
ESG matters on behalf of the Board.
The initiatives we take on ESG are linked
toour key stakeholders and what matters
tothem most, whilst being aligned to
andforming an integral part of our
corporatestrategy.
TARGETS
• Carbon neutrality by 2030
(Scope 1 & 2 emissions)
• Net Zero by 2040
(Scope 3)
• 50% reduction in food waste
by2030
ACHIEVEMENTS
• 7.8
Employee engagement score
• 3.9
FTSE4Good rating
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25
RESPONSIBLE BUSINESS CONTINUED
Doing more to be proud of
We are guest
obsessed
We raise
the bar
We will
grow
Key:
Leadership
Group ResponsibilityKey focus areas for2023
Link to
strategy
Key commitments
andgoalsOther areas of focus
ENVIRONMENT
Director
of Property
Net Zero: targets announced and strategy development, including a
move towards the electrification of our pub estate supported by
internal incentives such as ‘Going Green’
Carbon neutrality by 2030
(Scope 1 & 2 emissions).
Net Zero by 2040 (Scope 3)
• Reduction of energy and water consumption
• Environmental policy and strategy
• Responsible management of our pub estate
READ MORE ON PAGES 26–31
Innovation: adding to the existing 123 rapid EV chargers inourestate
and investing in energy efficient technology and equipment
Waste and recycling: continue to operate zero waste to landfill and
focus on reducing food waste volumes
SOCIAL
Director of Talent
Acquisitionand
EmployerBrand
Food waste reduction: supported by internal incentives such as menu
rationalisation, ‘Wise up to Waste’ and partnerships including a trial
with Too Good to Go
Reduction in our food
waste by 50% by 2030
Employee engagement
score of 8 or more
• Pay and reward
• Learning and development
• Diversity and inclusion
• Engagement and communication
• Apprenticeships
• Health and safety
READ MORE ON PAGE 32
Employee engagement KPI: continuously listening to our people to
inform the agenda for change, delivering our people initiatives and
our ‘People Promise’
• Supporting local pub initiatives
• Support for our Pub Partners
READ MORE ON PAGE 34
Social and charitable partnerships: Burnt Chef, Latitude and the
TrussellTrust
GOVERNANCE
Director of
CorporateRisk
Enhanced financial controls: including management review controls
and documentation
To remain in the
FTSE4Good index
SEDEX companies
ESG data collection
• Policies, including whistleblowing (‘Speak Up’) and
Modern Slavery Statement
READ MORE ON PAGE 41
• Risk management
READ MORE ON PAGES 43–52
Policy administration: oversight and ownership
Enterprise Risk Management: strategic alignment to risks, control
effectiveness tracking
Underpinned by strong governance
Strong governance framework: embedded through the business, linkedto corporate goals and measured through KPIs
Diversity and inclusion: 3/7 females on our Board of Directors and 4/7 females on our Executive Committee; two members of each who identify as being from an ethnic minority background
Prioritising health, safety and wellbeing: Working toward 5* EHO for our managed and franchised-pubs remains a key KPI and focus for our teams
Working together to create a sustainable future for our business, for the benefit of all our stakeholders
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RESPONSIBLE BUSINESS CONTINUED
Environment
Doing more
to reduce our
environmental
impact
In recent years our estates team has gained industry
recognition for their pioneering work to reduce emissions
atour pubs, reduce water consumption and increase
recycling levels.
Our Director of Property
was awarded ‘The Special
Achievement Award’
atthe Footprint Drinks
Sustainability Awards
We remain responsive to emerging
technology to prevent further environmental
harm, to current economic events, and to
partnerships which promote and support a
better environment and better lives for all.
Net Zero
Our Net Zero targets are:
• Carbon neutrality by 2030 (Scope 1 & 2
emissions).
• Net Zero by 2040 (Scope 3).
• The use of carbon offsets to cover
remaining emissions, which cannot be
mitigated using other actions.
Our Net Zero strategy has been developed in
alignment with the Zero Carbon Forum (ZCF),
a hospitality sector body which shares
expertise for the mutual purpose of achieving
Net Zero. The Forum aims to support the
sector to decarbonise at pace and to reach
Net Zero by 2040.
The ZCF’s data findings for the pub sector
show that 9% of emissions come from Scope 1
& 2 (e.g. fuel and electricity consumed
directly) and 91% of emissions are associated
with Scope 3 (e.g. purchased good and
services and logistics).
The key challenges for Marston’s, and our
supply chain, will include: decarbonisation of
heat generation, procurement of lower
carbon goods and services, and a move to
renewable fuels for logistics operations.
Residual emissions are likely to remain that
cannot be reduced or removed and these
will need to be offset.
To achieve our Net Zero target, future
business decisions will need to take into
account the effect on emissions. As the
business proceeds on the path to carbon
neutrality, operating and procurement costs
could be impacted in the short term but
making these adjustments sooner may mean
that we can reduce long-term costs.
As well as having a positive impact on the
planet, mitigation and adaption to climate
change presents opportunities including
lowering operating costs, reducing
reputational risks and future-proofing the
business. We are taking an active approach
to identify, approve and implement carbon
reduction projects. This is a focus for the
Environmental Working Group in the year
ahead, together with scoping out how we
will deliver our Net Zero strategy.
Environmental Working Group
Following the restructure of our ESG
Committee explained on page 24, under
thestewardship of our Director of Property,
weformed an Environmental Working Group.
Itis the responsibility of the group to
recommend, develop and deliver carbon
reduction projects which will move Marston’s
forward in its journey toward Net Zero. The
Working Group is chaired by our Energy
Manager and includes team members
fromestates, procurement, finance, pub
operations, food development and risk. They
meet quarterly and their work this year has
included identifying the optimal timing for
investment in new technologies, and our
progression toward renewable sources
ofenergy.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
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RESPONSIBLE BUSINESS CONTINUED
Environment
Waste and resource management
We are consistently above a 70% recycling
rate and have reached as high a rate as 80%.
We work with waste providers to ensure we
operate a zero waste to landfill business and
all non-recyclables that are able to, go to
energyrecovery.
Annually we audit hundreds of our pubs to
ensure they are utilising their recycling streams
correctly, to identify more opportunities to
increase recycling streams and prevent
recyclable items going into general waste.
The audits also enable us to optimise the
number of journeys our waste contractors are
carrying out, reducing the carbon associated
with these collections.
Food production is carbon intensive and food
waste compounds the issue. We are working
on initiatives to reduce food waste and to
achieve our target to reduce food waste by
50% by 2030, including menu rationalisation.
Further details are set out in the ‘Food Waste’
section. Any residual food waste at pub level is
taken to anaerobic digestion sites, where it is
used to produce biogas and fertiliser.
Capital investment projects
During the year, an estate review was
completed to identify the position of the
estate in terms of efficiency and readiness for
future investment in low carbon technology.
This included:
• Analysis of supplier and EPC data
• Electric capacity review
• Current building technology and low
carbon installations completed
• Review of application of on-site
renewable generation
Our capital maintenance and expenditure
programme presents an opportunity to
lowercarbon emissions and operating costs.
The standard measures included in any
refurbishment works in our pubs are as follows:
• LED lighting
• Insulation and draft proofing
• Heating and hot water controls
• Cellar fresh air cooling and management
systems
Dependant on the project, and
circumstances of the site, other low carbon
equipment may also be deployed.
Food waste
As well as a waste of resources, food waste
isamajor contributor to global carbon
emissions. Tackling it is in line with our strategic
objectives; we know it’s an important issue
forour guests and is intrinsic to raising our
standard of operation, as well as protecting
our operating margin.
All our food waste is measured by our
wastecollection partner. We regularly run
awareness campaigns for our team members,
to encourage them to segregate food waste
and maximise recycling opportunities. We
monitor the volume of food waste in order to
identify its cause and assess the effectiveness
of our campaigns.
We have set ourselves an ambitious target of
‘Doing more to be proud of’: 50% reduction
in food waste by 2030. The baseline is
financial year 2019 and the first year of
measurement was this financial year.
Following taking over the operation of the
SABrain estate, low carbon technologies are
in the process of being rolled out to bring
these properties in line with the rest of our
estate, including LED lighting and water
management systems.
Estate management
When new equipment is purchased for our
pubs, including catering and refrigeration
items, life cost analysis is completed. This
considers the useful life of the equipment,
energy costs, purchase costs, servicing
requirements and other operational costs
ofthe equipment. Whilst this methodology
considers life of equipment and energy costs,
it is recognised that it does not consider the
full carbon cycle of the equipment, which
the Environmental Working Group will seek
toaddress by aligning our procurement
processes with our Net Zero ambitions.
New equipment and technologies are
trialled ahead of any installation to validate
the operational efficiency, costs and
effectiveness. Trials are either completed in
our training facility or directly in the field to
gather adequate data. Once technologies
are proven, they may be rolled out across
ourestate.
Old equipment that fails or is beyond
economic repair is replaced with the latest
specification of equipment. This enables
improvement in energy efficiency and
carbon reductions to be made through
lifecycle replacement, and reduces the
carbon impacts through manufacturing.
In 2019, Marston’s produced 4,247 tonnes
offood waste, and this financial year we
haveproduced 3,266 tonnes. Whilst we
acknowledge that covers are lower than in
2019, and that there is still work to do, we are
delighted with what we have achieved so far.
A summary of the actions we have taken are
as follows:
• Menu and range rationalisation – as set
out on page 12, our menus have been
streamlined. As well as responding to
guest preferences, the rationalisation and
review process took into account dishes
that routinely resulted in waste being
returned to the kitchen; any such items or
dishes were subsequently modified or
removed. The simplification of our menus
has also resulted in efficiencies in our
supply chain and stock retention.
• Portion size review – in addition to range,
we reviewed portion sizes to optimise
guest preference and reduce waste.
Inour Signature pubs, chip portion size
was reduced from 284g to 234g.
• Supply chain initiatives – working with
oursuppliers to reduce waste at depot
level and trialling initiatives such as our
partnership with Too Good to Go.
• Education and reward campaigns – raising
awareness through in pub campaigns and
initiatives such as ‘Wise up to Waste’.
• Improved reporting – reporting waste
levels back to pub vs. covers, and the
introduction of an RAG rating for food
waste and working to improve
thoseratings.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
66,672
17
5,061
1,780
185
73,715
9.21
Electricity and gas
Petrol and diesel
Refrigerants – pubs
Liquefied petroleum gas (LPG)
Oil
Greenhouse Gas Emissions Intensity Ratio
CO
2
e tonnes per £100,000 turnover
Energy usage
(Scope 1 & 2), mwhrs
Total
GHG emissions by source (CO
2
tonnes)20222021
57,484
66
5,012
1,700
302
64,564
16.07
364,867302,031
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
28
RESPONSIBLE BUSINESS CONTINUED
Environment
We are currently trialling the Too Good to Go
app in 6 of our carvery sites which enables us
to connect with customers of Too Good to
Go and repurpose any meals that are left
over at the end of service. We are assessing
whether this can be rolled out across more
ofour pubs in the coming year. As well as an
opportunity to reduce food waste destined
for disposal, it also helps us to appeal to, and
welcome potentially new, guests to our pubs.
We also engage with WRAP to explore
opportunities to work with our wider supply
chain to reduce food waste and the
associated packaging waste.
CO
2
emissions reduction
Our target for Net Zero is explained on the
previous page, together with the initiatives
we have implemented and our focus for the
year ahead. In addition, our ‘Going Green’
campaign was launched this year which is
aimed at encouraging our pub teams to
conserve energy and reduce emissions.
EMISSIONS DATA
Currently we do not report the Scope 3 emissions by our supply chain. We are working with
the Zero Carbon Forum and our suppliers to calculate this data in future years.
Notes to emissions data:
1. We report on all the measured emissions
sources required under the Companies Act
2006 (Strategic Report and Directors’ Reports)
Regulations 2013.
2. Data collected is in respect of the year ended
30 June 2022, in accordance with the
Streamlined Energy and Carbon Reporting
regulation.
3. Total gas consumption compared to last year
increased by 23%. Electricity consumption
increased by 20%. To reduce the energy
consumed we focus on various initiatives
each year. Our catering equipment is
sourced to increase efficiencies, including
fryers that filter oil to increase oil life, and high-
efficiency chargrills. All of Marston’s cabinet
refrigerators purchased are high-efficiency
hydrocarbon units. We install LED lighting in all
internal areas, and use integrated movement
sensors in our back of house areas, reducing
the operational hours of lighting. We installed
voltage optimisation in all of our new-build
sites and have retro-fitted them into other
sitesacross estate. This year, we have also
increased the proportion of electricity from
renewable sources, which now accounts for
10% of the energy consumed.
4. The Greenhouse gas emissions intensity
ratiowas distorted in 2021 by the trading
restrictions during the pandemic. While we
took steps to reduce energy usage in our
pubs when impacted by trading restrictions,
we still had to maintain refrigeration, heating
and lighting in order to trade, particularly in
those pubs where the manager lives on site.
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RESPONSIBLE BUSINESS CONTINUED
Environment – TCFD report
This is the first year that we have produced a
TCFDreport, detailing the impact of climate
changeon our business, which includes the risks
andopportunities it brings and the pathway towards
achieving carbon neutrality by 2030, and Net Zero
by 2040.
An Executive summary of the report is
includedbelow,and the full report is available at
www.marstonspubs.co.uk. Marston’s is determined
to play its part in meeting the challenge posed by
climate change. Our Net Zero plan will align our
business to the future low carbon economy.
Scope 1 & 2 CO
2
emissions
Energy consumed by our business (mwhrs)
73,71564,564
20222021
364,867
2022
302,031
2021
We are making progress with industry partners
tocalculate the Scope 3 emissions for energy
consumed by our supply chain, and making
improvements as data becomes available
fromsuppliers.
Our emissions over the last three years were
impacted bythe pub lockdowns and trading
restrictions in 2021. The increase in emissions and
energy in 2022 predominantly reflects the lifting
ofthose restrictions.
TCFD disclosure compliance
The full financial impact of climate change and
NetZero cannot presently be quantified, though we
hope to provide this in future years, as the costs and
opportunities become more certain. In the meantime,
we have reduced our long-term growth rate by 0.2%
as a potential impact.
Climate change viability
Risks are not significant enough to impact our viability.
Well placed to deal with challenges, seize
opportunities and adapt.
CORE BUSINESS ACTIVITIES IMPACTED
Drink supplyFood supplyBuildingsLogistics
to our pubs
KEY RISKS AND OPPORTUNITIES FOR OUR BUSINESS
KEY AREAS FOR ACTION ON CLIMATE CHANGE
OUR NET ZERO TARGET
Flooding
Extreme weatherLegislation
Short term (1 to 5 years)Long term (over 10 years)
Consumer habitsTechnologyWater scarcity
Procurement
Miles travelled, energy and resources
consumed.
Waste
Packaging waste, plastics, volume and
recycling levels.
Food wastage
Production, guests, storage and
supplychain.
Energy
Sourcing renewable energy, efficiencies,
mix of sources, reduction and emissions.
Carbon neutral by 2030
(Scope 1 & 2 emissions)
Carbon Net Zero 2040
(Scope 1, 2 & 3 emissions)
IMPACT SUMMARY
`
Two pubs at risk of annual flooding.
`
Flooding damage across the estate over
the past 10 years: £3.2m.
`
At present, no increasing trend of flood
damage costs impacting our pubs over
the last 10 years.
POINTS OF PROGRESS
`
Net Zero: move towards the
electrification of the estate.
`
Innovation – installation of 123 rapid EV
chargers in our pub estate, assisting our
guests to move to low carbon transport.
`
Water conservation – water saved by
operating our own water licence.
`
Energy efficiency within our buildings,
kitchen and equipment. Review and
investment.
`
Promoting employee awareness
through ourcampaigns ‘Going Green’
and ‘Wise up to Waste’.
`
Guest insight tracking our consumer
preferences regarding their choices, price
sensitivity versus climate change impact.
`
Technology opportunities – investigation
and implementation of new catering
equipment and building materials and
specifications to reduce emissions.
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30
RESPONSIBLE BUSINESS CONTINUED
Environment - TCFD report
This report has followed the guidance set out in Recommendations of the Task Force
onClimate-related Financial Disclosures (June 2017) available at www.fsb-tcfd.org.
At the time of publication, we have made climate-related financial disclosures consistent with
the TCFD recommendations in our TCFD report against:
• Governance (all recommended disclosures).
• Risk management (all recommended disclosures).
• Strategy (disclosure (a)).
• Metrics and targets (disclosure (a)).
For strategy disclosure (a), further work is underway to enhance the identification, impact and
reporting for climate-related risks and opportunities, and how these risks map over the short,
medium, and long-term. We will update our TCFD reporting as these identified climate-related
risks and opportunities evolve over time.
Please find below a summary of the TCFD recommended disclosures with a key to highlight our progress in achieving them.
Our pubs are highly valued by the communities which
theyserve. We believe that strong local relationships and
understanding what is important to the local guest is essential
for the long-term success of our pubs; irrespective of the
operating model.
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Improvement in Reputation score
since new menu launch in April 2022
44
Our guest strategy
As with all other areas of our business,
wherever possible, all initiatives are aligned
with our strategic objectives:
We are guest obsessed – using insight led
data to dynamically respond to feedback at
pace, aiming to improve the quality of our
guest journey and overall experience.
We raise the bar – we constantly seek to
improve guest satisfaction; whether through
improved speed of service from reducing
operational complexity, or ensuring we follow
safe and ethical standards.
We will grow – aimed at improving our
margin and increasing our market share.
Wecontinue to work on category plans
toimprove our offer, additional revenue
opportunities and more disciplined pub
investment decisions.
Food and drink development
Our food and drink menus have been
reviewed and streamlined during the year.
Aswell as helping us to reduce food waste,
the review process involved listening to guest
and employee feedback and responding to
their preferences, suggestions or concerns.
Insight from Reputation tells us that quality of
food and drink is the single biggest influencer
of guest satisfaction.
Furthermore, we have transformed our
menusacross all the digital platforms. Menu
information is provided to our guests in a clear
and engaging way and we have worked with
Ten Kites Nutritics to improve the way we
display allergen and calorie information
onour menus, allowing our guests to make
informed choices more easily. Our menus are
now fully integrated with our websites and can
be filtered based on guest preference,
allergens or lifestyle choices such as
vegetarian or vegan dishes.
We continue to invest in systems and work
practices that provide accurate information
on allergens and nutritional content. From
our suppliers through to our kitchens, and to
the information provided to our guests, we
have worked to enhance the flow of this
data to increase its reliability and ease of
delivery. The system also helps us to monitor
criteria important to us as a responsible
retailer under our ‘Doing more to be proud
of’ initiative, including ensuring that our
suppliers implement responsible procurement
practices and comply with our Food Charter.
RESPONSIBLE BUSINESS CONTINUED
Community
Offering great
quality experiences
for our guests is our
top priority
We constantly strive to create happy, meaningful, memorable
experiences. Providing good food and drink is at the heart of
our business. Keeping that offering special and innovative is
what our guests love.
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Areas of focus this year
• Implementation of calorie labelling
onmenus (launched in April this year).
• Compliance with Natasha’s Law
whichintroduced mandatory allergen
information on pre-packed food
preparedon site, including support
forourPub Partners.
• We continue to make progress with our
salt reduction targets set by the Office for
Health Improvement and Disparities when
creating new menu items. We are working
towards the 2024 targets on all our items
and, based on our previous work in this
area, we are in a good position to
achievethese.
• We are continuing to commit to
redeveloping all own brand products
where egg is used as an ingredient, to be
cage free by the end of 2025. All shell
eggs in our supply chain have been
cagefree since early 2019.
Progress against key targets
Reputation score
Reputation generates an aggregate score
for our pubs based on numerous factors, such
as Google ratings and feedback on social
media. This platform is loved by our teams for
its simplicity and the impact it can have in
understanding their local guest preferences
and concerns, and providing actionable
insights. Our score has increased by 100 since
its introduction, but we see an opportunity to
further improve this score and it remains one
of our KPIs for this reason.
Allergens
Allergens training is mandatory and
thisreinforces how highly we value the
importance of equipping our teams with
theright knowledge, and responding to the
needs of our guests. We have also launched
an allergy auditing programme, which
involves mystery guest visits.
RESPONSIBLE BUSINESS CONTINUED
Community
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39
Suppliers onboarded on SEDEX
86
We have worked with our suppliers to help
reduce these exposures and to try and
findsolutions.
Despite the adversities and uncertainties in
the current market, on the whole, we have
been successful with our core food suppliers
in negotiating and renewing our key
contracts. This has demonstrated the
commitment of our trusted suppliers to work
through the wider issues currently impacting
upon the economy, and we thank them for
their ongoing support.
Our supplier and procurement
strategy
Our procurement strategy is built on
relationships which create sustainable
profitability for both ourselves and our
suppliers. Our supplier selection and tender
process is designed to ensure that we identify
key commercial/legal risks at the outset and
sufficient information is shared by both
parties. Material tenders are managed by
dedicated procurement specialists and
supported by subject matter experts, where
appropriate. Where possible, we involve our
suppliers in our business plans, building
mutual trust and supply chain resilience.
Wevalue long-term relationships, as
evidenced by the duration of many of
ourcore suppliers of food and services.
We seek suppliers who reflect our own
corporate values, which is demonstrated
during the selection process and supported
by accreditations and the use of SEDEX.
Food Supplier Charter
Our guests have a right to expect a high level
of diligence in the sourcing of goods, products
and services. With regard to food supplies, our
food charter sets out our expectations on
quality of product, traceability of ingredients,
ethical approach, sustainable sourcing and
associated labour practices. The Charter also
conveys our expectations for suppliers to
reduce their own environmental impact by
minimising unnecessary packaging and
choosing recyclable materials, wherever
possible. This forms part of the contractual
commitment when onboarding a new supplier.
The Charter is reviewed each year and
updated as necessary and includes the
Office for Health Improvement and Disparities
2024 salt targets and calorie targets. Our
suppliers work with us to achieve these targets,
particularly when new items are launched.
Inthe coming year, we expect to be able to
launch a Drinks Supplier Charter in the
samevein.
RESPONSIBLE BUSINESS CONTINUED
Community
Our supplier
relationships are
fundamental to
long-term success
The pressure on our supply chains has continued this year as
we all manage global and domestic issues, such as price rises,
labour shortages and rising commodity and energy costs.
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Impact of border controls
The UK Government has delayed the border
checks on all goods coming from the EU until
the end of 2023. The imposition of border
controls risks creating delays on the
importation of fresh food and meat from
Europe. The revised timetable has arguably
reduced the strain on food imports and
allowed more time for the UK Government to
ensure that the necessary infrastructure and
resource is in place.
Ethical sourcing
Our preference is to select suppliers who share
our ethical values on matters such as the
environment, employment rights, equality,
inclusivity, modern slavery and safety.
We are full members of SEDEX, which is a
platform used by many companies to share
information on ethical trading, including
labour practices. We are working with our
existing suppliers to ensure that they register
with, and provide the necessary information
to, SEDEX to enable us to further improve the
visibility and reliability of our supply chain.
Our drinks supplier: Carlsberg Marston’s
Brewing Company (CMBC)
Since October 2020, CMBC has been our
exclusive distributor of drink products and
CMBC has worked with us to meet the
challenges in sourcing the global drink brands
enjoyed by our guests.
In 2022 CMBC aimed to source 100% of its
energy from renewable sources, reduce
emissions from breweries by 50%, and reduce
emissions within its own operations and from its
suppliers by 15%. CMBC is working towards
zero carbon emissions from its breweries by
2030, and a 30% decrease in emissions across
their supply chain.
Modern slavery
Our full Modern Slavery Statement is
available at www.marstonspubs.co.uk.
Theinformation shared by suppliers on SEDEX
includes how they are responding to the risk
of modern slavery, allowing us to follow up
any issues raised.
RESPONSIBLE BUSINESS CONTINUED
Community
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41
NON-FINANCIAL INFORMATION STATEMENT
Marston’s PLC aims to comply with the non-financial reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006. The information set out below,
togetherwithsignposts to other relevant sections of the Annual Report and our corporate website, is intended to assist users in understanding the Company’s position and approach to the
following keynon-financial matters.
Our policies can be found on our website www.marstonspubs.co.uk
Reporting
requirementOur approachSupporting informationWhere to find it
Sustainability
Our ESG initiative ‘Doing more to be proud of’ supports our environmental
plans and our commitment to being a sustainable business.
TCFD report
Responsible Business
Environmental
PAGES 29–31 (EXECUTIVE SUMMARY)
PAGES 24–40
PAGES 26–31
www.marstonspubs.co.uk
Our people
• Marston’s policies are shared with all our employees on our Company
intranet ‘the Hub’ and website; many of which can be viewed publicly.
• The health and safety of our people and our guests is of paramount
importance to us.
• Our ‘Speak Up’ Policy and activities are overseen by the Board and
undergo annual review and campaigns to raise awareness amongst
ourpeople.
• Corporate hospitality – Rules to be followed by all employees governing
the acceptance of gifts or hospitality, the approval process and reporting.
• Competition law – Outlines Marston’s overarching commitment
andpractices to comply with the relevant legislation on competition
lawmatters.
Our people
Health and Safety Policy
‘Speak Up’ Whistleblowing Policy
Corporate Hospitality and Gift Policy
Data Protection Policy
Equal Opportunities Policy
Equality, Diversity and Inclusion Policy
Food Safety Policy
Fraud Policy
Group Purchasing Policy
PAGES 32–33
Human rights
Modern Slavery Statement
PAGE 40
www.marstonspubs.co.uk
Communities
• The Pubs Code – The Pubs Code regulates the relationship between pub companies owning 500 or more tied pubs in England
and Wales and their tenants. Information from the Pubs Code Adjudicator can be found at: www.gov.uk
• Food Supplier Charter – A combination of training, compliance testing, internal and external auditing and assurance
gathering contributes to the due diligence of the policies that support our approach to the five key non-financial matters.
• Food information system – Food ingredient information collected from our suppliers used to formulate our dishes, identify
allergens and communicate food constituents to our guests.
Audit Committee Report
PAGES 69–71
www.marstonspubs.co.uk
PAGE 37–38
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42
NON-FINANCIAL INFORMATION STATEMENT CONTINUED
Reporting
requirementOur approachSupporting informationWhere to find it
Anti-bribery and
corruption
Our Anti-bribery and Corruption Policy sets out our commitment to
conducting our business operations in a fair and ethical manner and our zero
tolerance approach to any form of bribery or corruption from our people,
suppliers or any third parties.
Anti-bribery and Corruption Policy
Anti-money Laundering Policy
www.marstonspubs.co.uk
Due diligence
Due diligence activities during the year have included:
• Anti-money laundering controls testing and awareness training
• Pubs Code compliance
• Pub financial audits
• External pub safety and food supplier audits
• External verification of energy emissions
• Review of our ‘Speak Up’ Policy and reports by the Audit Committee.
Other matters
• Business model
• KPIs
• Principal risks
The principal risks relating to key non-financial matters are market and operational, pandemic, health and safety, food safety,
political and economic, information technology and energy. Ultimately, risk management is about control and the way we
manage and mitigate those risks is set out in detail in the Risk Management section.
The Risk & Compliance Committee reviews the principal risks, conducts deeper dives into singular areas of risk and tracks
emerging legislation and the potential impact on the business. The Committee considers the Internal Audit plan and results,
plus compliance testing carried out by Internal Audit. Compliance with legislation and the Company’s policies is also tested.
PAGE 7
PAGE 9
PAGES 43–52
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RISK AND RISK MANAGEMENT
Managing uncertainty and new opportunities
The pandemic at the start of the financial year
continued to influence trade in the hospitality
sector. Our trading environment in that period
was caught between a confluence of
challenges; supply chains globally were still
being impacted, risking shortages of products.
For our pub teams, we experienced a higher
number of team absences due to COVID-19.
Recruitment has been ever more challenging
as the labour market has tightened. As a result,
the pre-Christmas period – which is normally a
buoyant time for trade – was distinctly muted
by people’s nervousness about meeting in
groups before the holidays.
In order to protect the liquidity of the
business, Marston’s has cut costs, reduced
capex and secured temporary waivers from
our bondholders to breach covenants. This
has allowed the business to manage its
financial risks and operate well within its
financial cash headroom. The business
focused on prudent cash management and
the continued organisation of the business
into a pure pub operator.
At the beginning of the year our IT network
was still running many of the core processes
for CMBC, such as the sales order process
andpayroll. This was always planned to be
ashort-term measure to minimise any risk of
disruption or loss of data from the separation
of our businesses. During the year, our IT
network was separated completely from
CMBC. This required careful project
management and control of risk to
ensurethat both businesses’ operations
wereunaffected by the transition.
The continuous operation of our supply chain
was at a higher level of risk during the year.
Whilst the economy adjusted following
thepandemic, the global demand for
commodities, technology and energy
intensified as demand in many areas out-
stripped supply. Our food supplies, in particular
those from overseas, require unimpeded
routes of transport in order to remain fresh.
However, the delivery of goods to our pubs has
remained strong despite these challenges.
The new risk environment and the changing
dynamic of our guests, together with a
resurgent demand amongst people to
meetand enjoy pubs, created a unique
opportunity for us to re-evaluate our place
inthe market. We realigned the management
ofour estate and relaunched our offering,
incollaboration with our suppliers. This
opportunity has allowed us to understand our
guests in more depth and thereby identify the
commercial opportunities across our estate,
byadapting the pub format to closely match
local demand. The opportunity allowed us
tocompletely relaunch our menu in time for
Easter, stripping out what was less important to
our guests and ensuring that the items which
mattered the most were best in class.
Risk management at Marston’s
The Board and Audit Committee recognise
theimportance of sound risk management
inorder to achieve our strategic objectives.
We continually assess the threats and
opportunities and design our risk
management processes so they are integral
toourbusiness and fit to meet the changes
inthisoperating environment. The trading
environment in which our business operates
changed as a result of the pandemic. These
changes have been compounded by other
global, economic and geopolitical factors
including: inflation, energy prices, labour
shortages, global demand, andrecession.
External factors will always change the risks
faced by our business, many of which, such
aspandemic, are unavoidable and must be
robustly mitigated if our strategic objectives
are to be met. Our risk management
processes aim to anticipate risks before they
impact upon our activities, to ensure that we
are in the best place to mitigate them and
recognise the opportunities they bring in a
competitive marketplace. Our guests have a
high expectation that our business operates in
a safe manner, upholding the high quality of
the drink and food sold and our reputation for
excellent service.
Risk management is primarily aimed at the
control of uncertainty. For all our key risks, we
identify the key mitigating controls and their
ownership. Our assurance activities are
focused upon those key risks so that we
continually understand the strength of our
controls. Maintaining a strong relationship with
our guests is implicit to our success. Our guest
surveys provide essential information about
our levels of service. We manage the risk to
reputation by using Reputation.com to collect
social media scores across all our managed
and retail sites. The scores help us to direct
focus on those sites where improvements will
matter the most.
We build resilience into our supply chain while
recognising the commercial importance of
taking risks within an acceptable tolerance.
We invest in our IT network to ensure there is
enough capacity and resilience to mitigate
the threat of disruption. We actively consider
and rehearse unexpected scenarios which
could impact upon us at short notice.
This in turn informs the practices and policies
which we follow, and the emergency plans
we adopt. Our people strategy and
behaviour framework is aligned with our
corporate policies to articulate what the
business expects of our employees.
Our appetite for risk
Marston’s is open to taking risks,
providing those risks align with, and help
us to achieve, our strategic objectives in
a responsible way and within agreed
parameters. Marston’s will, wherever
possible, remove those risks completely
that pose a threat to achieving the
strategic objectives. If avoidance is
impossible, Marston’s will seek to mitigate
risk by investing in effective controls or by
sharing risks with a third party. These
controls are managed and monitored
togive assurance that the risk level is in
accordance with the parameters set
bythe Executive Committee. It is our
understanding that our overriding
principle of care for our stakeholders,
ourcommunities, and the environment
isa priority for our strategic objectives.
We continually review risk to ensure we
guard against any threats to health,
hygiene or safety.
This statement represents the Board’s
appetite for the level of risk which it is
prepared to accept to achieve its business
strategy. The Board proactively seeks to
understand the risks faced, and a shared
understanding of the risk management
practices operated and their degree
ofeffectiveness.
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RISK AND RISK MANAGEMENT CONTINUED
Managing uncertainty and new opportunities
Current key risk drivers
A. Pandemic
The risk posed by COVID-19 has receded since
last year. There remains a risk that new waves
of infection, or new variants of the virus, might
influence our guests’ visits or Government
policy if the NHS comes under further strain.
Additionally, there remains the risk in the future
that a new form of pandemic could impact
upon our trade. While this risk is small, because
it uniquely has the possibility of closing our
pubs, it is necessary for us to continually review
our resilience to such a crisis.
B. Liquidity
The disruption to trade caused by the
pandemic and the consequential impact
onprofitability could affect the Group’s ability
to gain additional financial backing. The
Group secured waivers from its banks and
bondholders recognising the exceptional
nature of these circumstances. The Group
hasa stated aim to reduce debt which
willinturn mitigate liquidity risk. Since the
tradingrestrictions on pubs were lifted last
year the demand for our pubs and room
accommodation has rebounded,
demonstrating our long-term viability.
Amaterial uncertainty over going concern
has been disclosed in the financial statements
as we expect to seek further covenant
amendments before 31 December 2022.
C. Health and safety, and food safety
The safety of our guests and our people is a
priority for our business. Our team of safety
specialists work with our operational teams in
order to advise on safety, risk assess, formulate
policy, investigate accidents and track the
safety scores for each site. Sites are regularly
externally audited and the results acted upon
by management. Managers’ bonuses are
impacted by the safety scores. Our sites’
safety scores have improved during the year
by instilling a safety culture. Food safety has
been improved by the development of our
food information system, allowing for a more
accurate flow of information about the
ingredients in dishes from our suppliers
toourguests.
D. Operational risk: supply chain
During the year, our industry has experienced
disruption to its supplies of some food and
drink items. We have worked with our
suppliers to identify problems early so that
substitute items can be arranged that have
not diminished our guests’ enjoyment. The
Government has further delayed the full
border checking of goods coming from the
EU in order to ease the pressure on supplies
already stretched.
E. Operational risk: recruitment and
retention
Since the pandemic there has been an
increased number of vacancies within
thehospitality sector. Recruitment remains
challenging. To mitigate this, the business has
reviewed its competitiveness at recruiting
thebest people. We actively manage the
engagement of our people, surveying and
reporting back to our teams the steps taken
to address their concerns and listening to
their suggestions. We act to keep pay
andrewards competitive and respond
quickly when issues regarding retention
areidentified.
F. Energy/TCFD
The volatile energy market this year has
impacted upon the prices that we can lock
gas and electricity into. Furthermore the
energy market could contribute to the
economy going into recession. Our energy
contracts bring some certainty to the cost of
energy in the year ahead for our managed
and retail pubs. However, our Pub Partners’
businesses are individually exposed to the
movement in prices depending upontheir
own contracts. Climate change will impact
upon future energy costs and theinvestment
necessary to decarbonise ourbusiness.
Therisks and opportunities associated
withclimate change for our business are
setout, this year, in our first TCFD report,
which is available to download from
www.marstonspubs.co.uk.
Principal risks
The risks are plotted on the matrix according to impact and likelihood.
The placing of the risk reflects the position after the mitigation by controls.
1. Market and operational
2. Pandemic
3. Liquidity
4. Health and safety, food safety
5. Financial covenants and accounting controls
6. Political/economic
7. Information technology
8. Energy
Impact
Likelihood
Increasing
Reducing
Less movement
Key:
4
2
5
7
1
6
8
3
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RiskDescriptionPotential impactMitigation
1. MARKET AND
OPERATIONAL
LINK TO STRATEGY
During the current cost of living crisis, including high inflation and
consumer price sensitivity, there is an increased risk that our prices
become uncompetitive. Inflationary pressure on costs might be
difficult to pass on, resulting in reduced margin.
Marston’s revenue is dependent upon being able to offer, and
attract, our guests to an enjoyable experience of high quality food
and drink at the right price. It is reliant upon attracting existing
guests back and winning new guests. To achieve this we compete
for high calibre people to operate our pubs and focus heavily upon
their training and management. We carefully choose our suppliers
and the food and drink offered to our guests. Uninterrupted
operations are dependent on the continual supply of goods and
services, often from single sources. The operational performance
ofour suppliers is materially significant to our total profit.
Failure to attract or retain the best people can impactour pubs’
performance. Recruitment is more competitive due to a tightening
labour market and wage inflation. Disruption to key suppliers,
particularly those closely involved with our day-to-day activities
orshortage of commodities could significantly impact our
operations. Disruption to food supplies from the EU due to
administration, or customs checks, could impact upon our offering
to guests if we were unable to find substitutions. These factors
could mean over time that our pubs fail to attract guests, or do
notreflect changing preferences, or offer poor service or quality.
• Reduction in the number of sales or
lost opportunities to increase our
value proposition
• Reduction in guest satisfaction
levels and repeat visits to our pubs
• Increased costs as a result of
seeking alternative suppliers
• Continual assessment of guest preferences; market and
consumer insight data
• Continual analysis of sales performance data of single sites
and by pub format
• Pricing strategy built upon careful analysis, in sufficient
detail, of guests’ sensitivities
• Marketing, including digital marketing campaigns
• Tracking guest feedback on Reputation.com and targeting
our sites with improvement
• Cost control, including menu margin analysis
• Investment, location and design of our pubs
• Continual awareness of our people offer compared to our
competitors through participation in appropriate networks
• Improved training, induction and development
programmes
• Tracking the engagement of our employees and
identifying action points for teams
• Continual assessment of suppliers’ resilience and capacity
• Contingency planning with suppliers: identifying how
products or services can be substituted
Movement – Increased
Competition to recruit and retain the best people increased during this financial year. Since reopening after the lockdown in 2021, there have been short-term supply chain problems,
although any disruption has been alleviated without significantly impacting our guests.
Linked opportunity
Build the reputation of Marston’s as an affordable, high quality experience particularly when consumers are likely to change buying behaviour whilst the cost of living increases.
RISK AND RISK MANAGEMENT CONTINUED
Our principal risks and uncertainties
The following principal risks are recognised by the Board as those that could impact upon
the operation of the business and the achievement of its strategic objectives.
This is not intended to be a complete assessment of all risks as the Group risks change over time.
Risk movement key:
IncreasedDecreasedNo change
Linked opportunity key:
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RiskDescriptionPotential impactMitigation
2. PANDEMIC
LINK TO STRATEGY
COVID-19 demonstrated how a global pandemic
canimpact our industry and public life. One would
anticipate that at some point in the future another
pandemic will occur. The severity of a future pandemic
upon human health and the duration of measures taken
to reduce the infection rate are uncertain.
There is a risk that a variant of COVID-19 or another form
of pandemic causes infection rates to increase, leading
to future restrictions on the public and trading
regulations imposed on pubs and lodges.
• Ability of our teams to operate safely
• Reduction to the numbers of guests,
and shorter stays at our hotels
• Increased operating costs
• Remaining alert to Government advice
• Auditing our readiness to implement a response effectively
• Adaption of our pubs to facilitate social distancing
whenrequired
• Training available for our pub teams
• Building contingency plans for future lockdowns
• Consulting with our employees during an outbreak on safety
concerns and operational issues
• Simplified menus, streamlined guest offering to concentrate
upon offering the highest guest satisfaction at the right margin
• Regular scrutiny of asset values
Movement – No change in risk
Pandemic remains a risk to our business. Future variants of COVID-19 are possible, while vaccination rates remain lower in many countries. Future Government restrictions on trading could be
announced in response to the NHS once again coming under pressure.
Linked opportunity
Our pubs were sorely missed during the lockdowns, demonstrating their importance for social interaction and leisure. Pubs benefit from the increase in spend within the locality of the home,
aspeople spend more time at home and are less likely to holiday abroad. The reopening of a pub is a chance to reinvigorate its offering and to stand out to guests.
RISK AND RISK MANAGEMENT CONTINUED
Our principal risks and uncertainties
Risk movement key:
IncreasedDecreasedNo change
Linked opportunity key:
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RiskDescriptionPotential impactMitigation
3. LIQUIDITY
LINK TO STRATEGY
Our financial strategy is to reduce our debt below
£1billion. The UK economy is likely to go into recession
as a result of high inflation, rising interest rates, rising
costs in energy and a fall in consumer confidence.
Consumers will reduce spending as the economy goes
into recession and as prices rise. The cost of living crisis
created uncertainty regarding consumer behaviour.
While in previous recessions pubs have remained
attractive and affordable, this might not always be
thecase.
The liquidity of the business could come
under strain as a result of economic
pressure on the pub sector, particularly
ifrising prices cannot be passed on to
consumers.
• Seek further covenant amendments to avoid an expected
covenant breach at 31 December 2022
• Seek to increase the banking facility through an amend and
extend agreement
• Reduce debt
• Conserve liquid funds by reducing costs
• Maintain strong relationships with financial backers
• Lobby Government on the importance of the pub trade to the
UK economy
• Plan for resilience within our financial model to cover an
economic downturn
Movement – No change in risk
COVID-19 is no longer the immediate threat that it has been in the last few years. The economy in the UK is weakening, and consumer confidence is falling. The Group can mitigate the impact
of this by reducing costs, keeping its offering to guests attractive and affordable.
Linked opportunity
The movement in the economy can stimulate a change in the marketplace as higher-priced or less attractive operators are forced out and creates opportunities to stand out to our guests.
RISK AND RISK MANAGEMENT CONTINUED
Our principal risks and uncertainties
Risk movement key:
IncreasedDecreasedNo change
Linked opportunity key:
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RiskDescriptionPotential impactMitigation
4. HEALTH AND
SAFETY, FOOD
SAFETY
LINK TO STRATEGY
The safety of our guests, our people and the public is
fundamental to our activities. We seek to attain the
highest levels of safety across our estate. Lapses of
safety damage the trust and reputation of the business.
The provision of accurate and reliable information on
food, to our guests, is paramount. Our guests trust in our
high standards of food hygiene, food preparation
andquality.
Breaches of health and safety regulations and food
standards attract media attention and high penalties.
Public concern over allergens still remains high. There is
a risk that information is collected incorrectly from our
suppliers and/or misinterpreted for our menu items.
There is also a risk if a team member mis-advises a guest
on ingredients or serves the wrong meal. Increased
regulation directly affecting Marston’s or our suppliers
could increase the complexity of the information to be
provided and the cost of compliance.
• Financial penalties
• Significant damage to reputation
• Increased business complexity
impacting upon our guests’
experience
• Embedded health, safety and hygiene management systems
• Dedicated safety advisers for our pubs seeking continuous
improvement
• Regular independent expert safety audits
• Training of team members including e-learning modules on
specific risks, such as allergens, for completion by all front and
back of house team members
• Escalation of potential safety threats to senior operational
management
• Maintaining excellent levels of compliance through policies,
training and monitoring
• Working with our supply chain to maintain accurate records
identifying the constituent food ingredients and allergens
ofourmeals
• Due diligence on accepting new suppliers, monitoring
andtracking all suppliers
• Rigorous investigation of complaints
• Tracking legislative changes and adapting operations
• Food information system facilitating the collection of detailed
information on food constituents, providing a clear audit trail
and removing, where possible, the chance of manual error
• Smaller menus than previously, allowing a greater focus
uponquality
Movement – Decreased
The continued development of our food information system has given us the ability to collect and provide more detail to our guests. The risk remains significant because of the wide variety of
food items we source, and levels of food intolerance amongst the public. When our systems or practices are found to be at fault, we confront any failing honestly, in order to learn and build
better safeguards for the future.
Linked opportunity
In a competitive marketplace there is an opportunity to build a reputation for absolute commitment to guest care and building long-term trust.
RISK AND RISK MANAGEMENT CONTINUED
Our principal risks and uncertainties
Risk movement key:
IncreasedDecreasedNo change
Linked opportunity key:
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RiskDescriptionPotential impactMitigation
5. FINANCIAL
COVENANTS,
PENSION FUND
DEFICIT, AND
ACCOUNTING
CONTROLS
LINK TO STRATEGY
The Group’s financial system handles many transactions
accurately and securely. Accurate reporting is key to
running the business effectively, and in compliance
withour financial covenants.
Breach of the covenants with our lenders.
Incorrect reporting of financial results.
The pension deficit might increase if investment
yieldsfall.
Unauthorised transactions, failure of accounting
controls or overridden.
Greater responsibility to report on control effectiveness
as a result of the Government’s white paper on ‘Restoring
Trust in Audit and Corporate Governance’.
• Reputation damage and additional
financial operating restrictions
imposed by lenders
• Loss of investor confidence
• Covenant waiver permission sought from bondholders/
financiallenders
• Regular detailed management accounts, budgets and forecasts
• Detailed financial data collected from our sites
• Financial auditing of our sites based on data analysis
• Constant monitoring of financial ratios
• Internal and external audits
• Segregation of duties
• Access controls within our systems
• Levels of authority
• Commitment to reduce debt
• Management of the pension’s investment portfolio to spread risk
• Controls improvement programme underway to meet future
regulation anticipated from the Government’s white paper on
‘Restoring Trust in Audit and Corporate Governance’.
Movement – No change in risk
There are strong controls mitigating this risk to a low level. The impact on our covenants is reduced by clear communications to, and engagement with, our lenders which explains the financial
impact of the lockdowns in recent years and the trading conditions.
Linked opportunity
To further strengthen our relationships with our bondholders, communicating information on the business and the impact of decline in consumer confidence upon our sector.
RISK AND RISK MANAGEMENT CONTINUED
Our principal risks and uncertainties
Risk movement key:
IncreasedDecreasedNo change
Linked opportunity key:
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RiskDescriptionPotential impactMitigation
6. POLITICAL
AND ECONOMIC
LINK TO STRATEGY
Changes to Government policy impact upon the cost
base for operating pubs, either positively or negatively.
At the same time, economic factors such as the current
period of inflation and high demand for certain
commodities and products, also impacts our operating
costs and those of our supply chain. Legislative changes
also impact business, particularly in recent times the
move to decarbonise the economy. It remains uncertain
how successful the Government and the Bank of England
can be in curbing inflation pressure in the year ahead
and what the impact will be on consumer confidence.
There is a risk that inflation continues to rise, leading to
higher interest rates, increased unemployment, and low
consumer confidence. The UK as well as many other
countries is at a risk of a deep recession, exacerbated
by high energy costs and shortages of commodities.
• It may be harder to secure long-term
agreements with our suppliers while
prices rise and shortages of some
commodities or products exist
• To constantly review the positioning of our guest offer at the
rightprice point, to maintain or grow margin whilst remaining
competitive
• Continue to lobby Government on matters that are likely
torestrict trade or increase costs
• Continually assess our supply contracts and renegotiate terms
when they fall due
• Where feasible, work with our key suppliers to hold sufficient
stocks in the UK to cover short-term disruption
• Consider alternative sources of supply if our suppliers have
trouble importing goods
• Financial forecasts stress tested based on reduced revenue
asaresult of an erosion in consumer confidence
Movement – Increased
Inflation impacts the cost base for our business as well as our suppliers and our partners. At the same time our guests have less money to spend, which makes a recession more likely in the UK.
Linked opportunity
Pubs normally remain very competitive when prices are rising in the economy. They are perceived as an affordable treat offering an experience which can be flexed to suit demand, for
instance offering greater value for money over quality or the range of choice. Our ability to track and react quickly to changes in preference could offer a competitive advantage. Our scale
of operations and long-term stable relationships with suppliers could also help us control costs better than competitors.
RISK AND RISK MANAGEMENT CONTINUED
Our principal risks and uncertainties
Risk movement key:
IncreasedDecreasedNo change
Linked opportunity key:
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RiskDescriptionPotential impactMitigation
7. INFORMATION
TECHNOLOGY
LINK TO STRATEGY
Our business activity is reliant upon our IT network
tocommunicate, operate effectively, serve our
guests,process transactions and report on results. The
continuous operation of our business is dependent upon
the uninterrupted running of our computer network, site
links and the internet. The cyber threat has increased in
recent years targeting vulnerable businesses with data
theft, data encryption, denial of service and fraud.
Marston’s handles the personal contact details of many
of its guests who opt to use the Wi-Fi or sign up to
receive mails. In addition, the Group retains the
employment data for a large number of people.
Threats to IT are both external and internal and could
result in a network outage, loss, theft or corruption
ofdata or denial of service. The risk extends to the
companies that we share data with for processing
orstorage on our behalf.
• Reduction in the effectiveness of
operations, business interruption and
loss of profit
• Regulatory fines as a result of the loss
of data
• Reputational damage due to a loss
ofdata
• Anti-virus and firewall protection
• Access control, password protection and IT policy adherence
• Network and device controls and monitoring
• Penetration testing and remediation
• Cyber defence testing
• Backup procedures
• Data recovery plans and rehearsals
• Raising employee awareness regarding IT security
• Data security policies, processes and training
• Data breach incident response plan and scenario training
Movement – No change in risk
Global cyber risk has evolved in recent years, particularly the exploitation of vulnerable companies that may have less defence but exist within supply chains sensitive to disruption.
Cybercriminality has, in recent years, sought to take advantage of stretched supply chains and the increase in homeworking to exploit gaps in corporates’ cyber defences.
Linked opportunity
Our digital engagement with guests is greatly valued by them, whether it’s to book a table or a room, receive offers by email or order a meal. Keeping our guests’ confidence allows us to take
advantage of these tools and have the confidence to innovate new ways to engage and market our business digitally. Our internal controls are continually enhanced by digital tools
including, in recent years, our analysis and reporting of sales data, team planning, recruitment, concessions and food information.
RISK AND RISK MANAGEMENT CONTINUED
Our principal risks and uncertainties
Risk movement key:
IncreasedDecreasedNo change
Linked opportunity key:
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RiskDescriptionPotential impactMitigation
8. ENERGY
LINK TO STRATEGY
This risk incorporates both energy price rises, and the
wider strategic approach to sourcing energy. Energy
prices have plateaued and more recently fallen. The
transition to Net Zero emissions is a challenge for our
business and those within our supply chain. The transition
could result in higher costs as a result of investment in new
technology, and from sourcing a higher proportion of
renewable energy.
Recent high energy costs have added to inflationary
pressure, a reduction of operating margins for many
businesses, increased Government borrowing and a
reduced disposable income. Contractual negotiations for
energy play a key role in locking in prices and mitigating
the risk of energy price spikes.
In the long term, higher energy prices could make it more
difficult to source renewable energy at a commercial
price. This would increase the risk that the transition to
NetZero is delayed or becomes more costly, both for our
business and our supply chain. However, there are options
available to the Government to influence lower prices for
renewable energy in the future.
• High energy prices have the ability to
impact upon all areas of the economy.
They increase the likelihood, and
length of a recession. The positive
impacts are that encourage more
investment in projects for the use of
sustainable energies, and a greater
focus upon energy efficiency
• Energy contracts to provide stability to the price paid. Gas price
fixed until end of 2025, electricity fixed to 31 March 2023
• Investment in energy saving projects, such as heat source pumps,
building management systems, cellar cooling, voltage
optimisation, air-flow rather than ventilation and catering
equipment efficiency
• Government support for small businesses to cap prices and
guard against the most excessive increases
• Transition to Net Zero away from fossil fuels
• Transition of our supply chain to Net Zero
• Technological innovation
• Public support and awareness of the need to invest in
greentechnology
• Investment in the energy performance ratings of our building
• Evaluation of energy savings projects
Movement – No change to risk
Energy costs have risen dramatically this year, stimulated by the reduced flow of gas from Russia to the EU. Governments borrowed more in order to stem the worsening impacts of higher prices on
their economies but, at the same time increasing the likelihood of a global recession. More recently energy prices in the UK have fallen and the risk has consequently plateaued. The impact of
climate change upon the planet remains a key driver for Government policy, contributing to shortages in certain foods and increased prices.
Linked opportunity
Our efforts to decarbonise and evolve our operations to keep abreast of changes in our guests’ lives are likely to be well appreciated. Our guests are likely to increasingly make sustainable
choices and will be more comfortable visiting our venues if they know how we are reducing our environmental impact.
RISK AND RISK MANAGEMENT CONTINUED
Our principal risks and uncertainties
Risk movement key:
IncreasedDecreasedNo change
Linked opportunity key:
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53
RISK AND RISK MANAGEMENT CONTINUED
Our levels of defence
1. Management ownership of risk
andcontrol
The Group operates within a clear set of
policies established by the Board, and the
Executive Committee. Adherence to these
policies governs the parameters within
whichthe business accepts risk. Authority is
delegated through the business to ensure
thatmanagement is empowered to operate
effectively while staying within the system of
governance approved by the Board. Our
managers are responsible for identifying risks,
monitoring them and operating the control
environment necessary to mitigate them to a
level which is within the risk appetite of the
business. Authority levels are aligned with
levels of management and the degree of
responsibility over risk. Changes to policies
occur at the instigation of management, in
response to either new threats, legislation or
new opportunities.
A record of the key controls is kept in our
Corporate Risk Register. The managers’
assessment of the effectiveness of these
controls is collected by our Internal Audit team
and reported to the Audit Committee and the
Board. Internal audit testing is performed on
key controls in order to gain sufficient
assurance on their effectiveness.
The key features of the internal control
systemare:
• A clearly defined management structure
operating within a framework of policies
and procedures covering authority levels,
responsibilities and accountabilities. Policies
are communicated to the appropriate
teams on induction and kept accessible on
the employee intranet. The policies are kept
under review, updated and communicated
when required. Awareness of the policies is
built into our induction and training
programmes.
• Embedded risk management into day-to-
day activities.
• Continual improvement by reporting on
effectiveness, recognition of weaknesses,
additional investment and by encouraging
achievement.
• A detailed formal budgeting process for all
activities, with the annual budget and
projections for future years formally
approved by the Board.
• Established procedures for planning,
approving and monitoring capital
expenditure and major projects designed
within a sound framework of risk
management.
• Board approval requirement for all major
investment, divestment and strategic plans
and programmes.
• At each of their meetings the Board reviews
financial and non-financial progress
towards the strategic goals. Control systems
are designed to manage rather than
eliminate risk. By their nature, such systems
provide only a reasonable and not an
absolute defence against material errors,
losses, fraud or breaches of the law.
2. Committee oversight
The Executive Committee meets regularly
toconsider how to implement the actions
required to achieve business objectives,
andto monitor risks and opportunities. The
Executive Committee takes ownership of the
implementation of the business strategy, the
operation of the business to meet operational
and financial targets, and the design of
internal controls to reduce risks. The Executive
Committee understands the Board’s appetite
for risk. Management is directed to collect
information in order to measure the control of
risk and report to the Executive Committee to
ensure that the business is operating within
therisk appetite. Management considers,
communicates and implements the decisions
on risk made by the Board and the Executive
Committee and continually reports on the
impact of those decisions.
Within our management structure we
operate several committees in order to focus
attention upon areas of risk requiring senior
management attention:
Risk & Compliance Committee
(Chaired by the General Counsel &
Company Secretary)
The Committee reviews the identification
ofthe principal risks and considers the
alignment of internal audit testing. It also
conducts an examination of areas where risks
are significantly changing. The Committee
tracks the emergence of new legislation
andmonitors the Group’s preparation for
compliance. New policies are considered by
the Risk & Compliance Committee before
submission to the Executive Committee and,
where appropriate, the Board for approval.
Data Security Committee
(Chaired by the Director of Corporate Risk)
The representatives on the Committee reflect
the more significant areas of risk regarding the
protection of personal and commercial data
and cyber security. Our data security policy
and management processes are maintained
to govern legal compliance. All employees
receive data training on induction and at
appropriate intervals. Data security guidance
is always available to our employees. Our
data security Incident Response Plan is
stress-tested by scenario planning in order
toensure an effective response to any
incident. Our Data Security Analyst regularly
undertakes desktop and physical audits of
ourthird-party data processors.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
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54
RISK AND RISK MANAGEMENT CONTINUED
Our levels of defence
Business Continuity Steering Committee
(Chaired by the Director of Corporate Risk)
The resilience of the Group to events outside
of its control is considered, and the lessons
learned from any actual incidents or scenario
tests. The Committee considers the threats to
our continual operation, the resilience of our
business to cope with the unexpected
andthe rehearsal of emergency plans.
Consideration is given to the resilience of our
supply chain, our suppliers’ own planning and
our ability to seek alternative supplies at short
notice. The Committee is briefed on
improvements to IT resilience, its protection
from interference and its recovery plan.
3. Assurance governance
The Risk team comprises the Director
ofCorporate Risk and the Internal Audit
function. The team reports to the General
Counsel & Company Secretary who can
elevate matters regarding risk, where
appropriate, to the Board. The Director of
Corporate Risk attends the Audit Committee
meetings and can raise any concerns
regarding risks independently.
Enterprise Risk Management (ERM)
The Director of Corporate Risk operates an
ERM process in order to identify, monitor and
report on those risks which could impact on
our ability to achieve our strategic objectives.
The key risks and controls are recorded in our
Corporate Risk Register. The ownership and
assessment of risks is discussed and recorded
during regular meetings with the relevant and
responsible managers. The Corporate Risk
Register is shared appropriately with the
managers in order to keep it current and
relevant to the business. We use common
riskmanagement tools and language to
engender cross-functional consistency and
measurement across the Group. Levels of
insurance cover are managed by the Director
of Corporate Risk, with the authority of the
Board, and in consultation with external
advisers. New levels of insurance and cover
are considered each year in the context of
the changing risks and external threats.
Internal Audit
The Internal Audit team is managed by the
Director of Corporate Risk and is independent
from the operations of the business. Internal
audit strategy is risk based and testing is
focused on principal or material risks. The
strategy has been approved by the Audit
Committee and aims to provide a sufficient
level of assurance regarding the strength of
the control environment as well as supporting
continual improvement in risk management.
The Internal Audit plan produced takes into
consideration the key risks within the business,
recorded in the Corporate Risk Register, areas
of increased risk and the regularity of the
testing. The plan is developed in consultation
with the Executive Committee and the Risk &
Compliance Committee and takes into
account areas of concern which require
additional assurance from audit testing. Once
approved, internal audits are undertaken by
the Internal Audit team with support from
senior management and, where necessary,
additional resource and expertise are sought
from an independent professional internal
audit co-source. The annual budget for
internal audit is approved by the Executive
Committee and the Audit Committee.
The Internal Audit team audits the strength
ofour profit protection controls within the pubs,
using either data analysis to identify pub sites
ofconcern or following requests from Area
Managers. The results of this testing, providing
there is no conflict, are communicated to
theoperational managers and follow-up
audits can be arranged if necessary to
measure improvement.
4. Strategic
The Executive Committee is chaired by
theChief Executive Officer and comprises,
amongst others, the two operational directors
who are responsible for the implementation of
strategy and for carrying out actions directed
by the Board, monitoring performance and
overseeing risk management and internal
control. Actions required are communicated
tothe senior managers within the business.
5. Board/Audit Committee
The Board is ultimately responsible for the
Group’s framework of governance, internal
control and risk management. The mitigation
of risk is delegated to the Executive Directors
and other senior management. The Board is
responsible for ensuring that management
reviews and reports on the effectiveness of the
internal controls. The Board is also responsible
for understanding the nature and extent of
the principal risks, its risk appetite and the
Viability Statement.
The Management reporting to the Board
isinsufficient detail for the Board to assess
itsrisk appetite in the context of the risks
andopportunities, and to make informed
decisions in order to accomplish the strategic
objectives. During the year, the Board has
robustly assessed the risks and opportunities
faced by the business, considering the
abilityof the business to achieve its
strategicobjectives and the impact
ofemerging legislation.
New Non-executive Directors of the
Boardareinducted into the business
throughmeetings with senior managers, the
Executive Committee, the finance team and
external advisers. This gives new Directors the
opportunity to understand the challenges
forthe business, risks and the controls and
processes operated. New Directors are
alsogiven a pack of information on business
operations and access to previous Board and
Committee minutes as appropriate.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
55
RISK AND RISK MANAGEMENT CONTINUED
Viability statement
To assess the impact of the Group’s principal
risks and uncertainties on its long-term viability,
a severe but plausible downside scenario was
applied to the Group’s financial forecasts in
the form of reduced sales, it has been assumed
that variable costs will move in line with the
change in sales volumes. It is assumed that
theGroup’s financial plans would be adjusted
in response to each scenario by reviewing
controllable and discretionary costs alongside
capital investment.
The principal risks currently facing the
businessrelate to the continued uncertainty
surrounding the political and economic
environment with regards to the cost-of-living
crisis, (market and operational (risk 1),
pandemic (risk 2) and political and economic
(risk 6) and subsequent variants and the
consequential impact on trading should
anyfuture restrictions be imposed, thereby
inhibiting activity and sales income. The
Group has reviewed this in the forecast
scenarios and sensitivities by incorporating a
reduction in sales (downside scenario). Whilst
the experience of the cost-of-living crisis and
the pandemic could be expected to lead to
lasting changes in both consumer behaviour
and competition in the hospitality sector, in
making this assessment the Group has taken
the view that any adverse impact on sales,
through reduced visits from the cost-of-living
crisis and any trading restrictions, will be
temporary in nature and should not extend to
any material extent into the future. Pubs have
been resilient in previous economic downturns
and offer value to the consumer.
Liquidity (risk 3), both secured debt and
unsecured facilities, is assessed in the forecasts
and, in both the base case and the severe but
plausible downside case, the Group will be
required to seek amendments to covenants
on its banking facility. Whilst there is no
certainty that these amendments will be
granted (this has been disclosed as a
materialuncertainty over going concern
inthe financial statements), given our
experiences to date we are confident of
securing these where necessary. In all
scenarios the Group continues to remain
profitable with adequate liquidity.
In the forecasted period the Group is required
to refinance its banking facility and private
placement facility in March 2024 and it has
been assumed that this would be on similar
terms as the current facility.
In terms of resilience, the forecast considers
market and operational (risk 1), political and
economic (risk 6) and energy (risk 8) risks,
focusing on the impact on sales with a
reduction in turnover from fewer guest visits
alongside increasing costs from inflationary
pressures, interest rate rises and regulatory
changes. The forecasts took into account
market insight and trends based on changing
consumer behaviour and therefore
considered the allocation of capital
toadaptto these trends.
In making this statement, the Directors
carried out a robust assessment of the
principal risks and uncertainties facing the
Group, including those that would threaten
its business model, future performance,
solvency or liquidity. Principal risks and
uncertainties set out on pages 45–52 are
theresult of internal risk management and
control processes, with further details set
outin the Audit Committee’s report on
pages 69–71.
In accordance with provision 31 of the
UKCorporate Governance Code 2018,
theDirectors confirm that they have a
reasonable expectation that the Group will
continue to operate and meet its liabilities,
as they fall due, for the next three years.
Consistent with the previous year, three years
continues to be adopted as an appropriate
period of assessment as it aligns with the
Group’s planning horizon in a fast-moving
market subject to changing consumer tastes
in addition to economic and political
uncertainties, and is supported by forecasts
as approved by the Board. It also aligns with
the Group’s capital investment plans and
gives a greater degree of certainty over the
forecasting assumptions used.
The Directors’ assessment has been made
with reference to the Group’s current
position, its financial plan and financial
planning process, comprising a detailed
forecast for the next financial year, together
with a projection for the following two
financial years. The plan also reflects the
Group’s principal risks and uncertainties set
out on pages 45–52, specifically market and
operational (risk 1), pandemic (risk 2),
liquidity (risk 3), political and economic
(risk6) and energy (risk 8).
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
56
CORPORATE GOVERNANCE REPORT
Chair’s introduction
WILLIAM RUCKER
MARSTON’S CHAIR
Culture and values
Throughout these challenging times, the
special and unique culture at Marston’s
continues to thrive and our people and Pub
Partners remain passionate and committed
to delivering great guest experiences, always
seeking to raise the bar and support the
growth of the business. The Board is
responsible for setting the Company’s values
and ensuring that they are aligned with our
culture. Further details of how we do this at
Marston’s can be found on page 60.
The Board and senior
managementteam
Andrew Andrea was appointed Chief
Executive Officer, and Hayleigh Lupino
succeeded Andrew as Chief Financial Officer
on 3 October 2021. Andrew and Hayleigh
aresupported by a refreshed Executive
Committee including Bethan Raybould,
whowas appointed as General Counsel
&Company Secretary on 1 February 2022.
Anne-Marie Brennan retired as Group
Secretary on 31January 2022 after 18 years
ofdedicated service. The succession pipeline
and quality ofleadership below the Executive
Committee has been further enhanced with
the creation of the Leadership Group,
comprising 28cross-functional senior
managers reporting directly to the
ExecutiveCommittee.
We were also delighted to welcome Nick
Varney to the Board, as a Non-executive
Director, with effect from 1 July 2022. His skills
and experience in the leisure sector will bring
additional insight, challenge and expertise to
our Board. Succession planning remains an
integral part of our governance cycle and
onpages 72 to 76. In reviewing the Policy,
weengaged with our major shareholders,
and arepresentative group from our
workforce, toseek their views on our
proposals. Wethankour shareholders
andworkforce representatives for their
feedback and willingness to engage on
theseimportantmatters.
Audit
The principal responsibility of the Audit
Committee continues to be the integrity of
ourfinancial statements and the effectiveness
of our internal controls and risk management
framework. The Audit Committee also
manages the relationship with our external
Auditor. The report from the Audit Committee
is on pages 69 to 71.
Good governance
Our vision, goals and priorities are clear,
andour governance framework supports
these. The Board’s Section 172(1) statement is
set out on page 56, demonstrating how we
have fulfilled our section 172 duties, and details
of how the Board has engaged with different
stakeholder groups can be found on pages
21–23. The 2018 UKCorporate Governance
Code (the ‘2018 Code’) has applied
throughout the reporting period and the Board
considers that we havefully complied with the
principles and provisions of the Code. Further
explanation ofthis is set out in the compliance
statementon the following page.
DEAR SHAREHOLDER,
I am pleased to present our Governance
Report to you, together with reports from
theNomination, Audit and Remuneration
Committees, each providing an overview
ofthe key activities undertaken in the last
financial year. The main focus of the Board
(and all Committees) has been tosupport
the Company with its continued recovery
from the impact of the pandemic, helping to
navigate the challenges posed by the war in
Ukraine and the macro environment, such as
supply restrictions and cost increases and the
ongoing fulfilment of our strategic objectives
and delivery of our vision of ‘Pubs to be
proud of’.
wecontinue to monitor the composition of our
Board, being mindful of the benefits that an
alternative external perspective can bring.
Within the normal cycle of Board evaluations,
this year we conducted an internal evaluation
of the effectiveness of the Board and its
Committees. Further details, including a
summary of our findings and an update on
our progress against the agreed actions from
the 2021 evaluation, are set out on page 67.
Profiles of each Director can be found on
pages 58 and 59.
Sustainability
We remain committed to driving a positive
ESG agenda under our ‘Doing more to be
proud of’ initiative, with targets announced for
Net Zero by 2030 for Scope 1 and 2 emissions
and by 2040 for Scope 3. Further information
isset out on pages 24 and 25.
Remuneration
Our remuneration principles remain
unchanged. We aim to provide
remunerationthat motivates our people
without encouraging excessive risk taking,
with incentives aligned to strategy that
encourage enhanced and sustainable
performance. The focus for the Remuneration
Committee this year has been the review of
our current Directors’ Remuneration Policy,
last approved by shareholders in 2020. The
Committee has also considered remuneration
and reward across the organisation and how
to motivate and reward in challenging
circumstances. Our proposed new Policy,
together with details of how the current Policy
has been applied during the period, are set
out in the Directors’ remuneration report
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Tenure of Chair and
Non-executive Directors
0–3 years
2
3
3–6 years
Board gender diversity
Female
4
3
Male
1
2
4
Balance between Executive
andNon-executive Directors
Chair
Executive Directors
Non-executive Directors
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
57
UK Corporate Governance Code compliance statement
The 2018 Code applied to the 2021/22 reporting period. The 2018 Code is available on the
We draw attention to note 1 to the financial statements which
indicates that the Group’s and the parent Company’s ability to
continue as a going concern is dependent on the ability to achieve
further covenant waivers or amendments if required.
These events and conditions, along with the other matters
explained in note 1, constitute a material uncertainty that may
cast significant doubt on the Group’s and the parent Company’s
ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
There is judgement involved in the Directors’ conclusion that risks
and circumstances described in note 1 to the financial statements
represent a material uncertainty over the ability of the Group and
the parent Company to continue as a going concern for a period of
at least a year from the date of approval of the financial statements.
Clear and full disclosure of the facts and the Directors’ rationale for
the use of the going concern basis of preparation, including that
there is a related material uncertainty, is a key financial statement
disclosure and so was the focus of our audit in this area. Auditing
standards require that to be reported as a key audit matter.
• Funding Assessment: We inspected correspondence with
CreditProviders and board minutes during the period and
afterperiod-end to the date of authorisation of the Annual
Report toidentify any indications that Credit Providers may
notcontinue to support the Company through covenant
amendments. Wenoted that the directors had not identified
atechnical default in their initial going concern assessment,
therefore had not taken into account a risk in relation to this
respect and we requested that the directors include additional
risks in their assessment. However as noted in Note 35,
retrospective waivers have been secured. The Group also
obtained prospective waivers from its private placement.
• Historical comparison: We compared forecast results for future
periods with the actual experience of previous periods to assess
the Group’s ability to accurately forecast;
• Key dependency assessment: We evaluated the Group’s
covenant and cash flow projections and their underlying
assumptions by reference to our knowledge of the business,
theCredit Agreements and available facilities to the Group;
• Sensitivity analysis: We considered whether the Group would
have sufficient cash headroom in the forecast period in a severe
but plausible downside scenario that reflected the plausible
impact of high inflation on the business;
• Our experience: To assess the likelihood that the Credit Providers
will not agree covenant amendments we used our knowledge of
similar covenant amendments and waivers agreed between the
Group and Credit Providers in previous periods;
• Benchmarking assumptions: We evaluated whether there is
adequate support for the assumptions underlying the Directors’
assessment, including mitigations, whether they are realistic and
achievable and consistent with the external and/or internal
environment and other matters identified in the audit.
• Evaluating directors’ intent: We evaluated the cashflow forecasts
to assess the controllable mitigations available to the Group such
as deferring capital expenditure to improve cash headroom if
required in a severe but plausible downside scenario.
Our results
We found the disclosure of the material uncertainty to be
acceptable (2021: acceptable).
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101
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED
3. OTHER KEY AUDIT MATTERS: INCLUDING OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. Going concern is a significant key audit matter and is described in section 2 of our report. We summarize below the other key audit matters, in
decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our
results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
The riskOur response
Valuation of effective freehold land and buildings
(Group - £1.682.4 million; 2021:
£1,529.9 million
Upwards revaluation: £75.1 million;
2021: downwards £100.5 million)
(Parent company - £192.7; 2021:
£172.0 million
Upwards Revaluation: £19.6 million;
2021: Downwards Revaluation £23.2 million)
Refer to page 71 Audit Committee Report, page 127 accounting
policy and page 136 financial disclosures.
Subjective Valuation
The valuation of the Group’s and the parent Company’s
estate,specifically the freehold land and buildings and
‘effectivefreehold’ leasehold properties held at fair value is a
keyarea of estimation.
The valuation involves the determination of estimates, most
noticeably the fair maintainable trade (FMT) and applicable
trading multiples.
These estimations are inherently subjective and small changes
inthe assumptions used to value the Group’s and the parent
Company’s estate could have a significant effect on the strength
of the Group’s and parent Company’s balance sheet.
The effect of these matters is that, as part of our risk assessment,
we determined that valuation of the estate has a high degree
ofestimation uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial statements
as a whole, and possibly many times that amount. The financial
statements (note 11) disclose the range estimated by the Group.
Our procedures included:
• Assessing valuation approach: We met with the Group’s external
valuers to understand the assumptions and methodologies used
in valuing the properties and the market evidence used by the
external valuers to support their assumptions. We also obtained
an understanding of Directors’ involvement in the valuation
process to assess whether appropriate oversight has occurred;
• Assessing valuer’s credentials: We critically assessed the
independence, professional qualifications, competence and
experience of the external valuers engaged by the Group;
• Benchmarking assumptions: We challenged the key
assumptions, with the assistance of our own KPMG valuation
specialists, being the applicable trading multiples and fair
maintainable trade, by making a comparison to market
comparable data;
• Assessing inputs: We checked observable inputs used for a
sample of assets in the valuation to source documentation;
• Comparing valuations: We evaluated and challenged the
output of the valuations by checking that the key factors driving
the valuation, being size, location, tenure and historical trading,
had influenced the pub-by- pub valuations, and through the
identification of higher risk assets through comparison to market
transactions and prior period information; and
• Assessing transparency: We critically assessed the adequacy of
the Group’s disclosures in relation to the valuation of the estate.
Our results
• We found the valuation of the estate to be acceptable
(2021:acceptable).
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
102
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED
3. OTHER KEY AUDIT MATTERS: INCLUDING OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT CONTINUED
The riskOur response
Valuation of CMBC Investment
(£260.3 million; 2021: £277.4 million)
Refer to page 71 Audit Committee Report, page 122 accounting
policy and page 138 financial disclosures.
Forecast-based assessment
The Group and Parent company hold an investment in associate
named Carlsberg Marston’s Brewing Company (‘CMBC’). The
investment is significant and at risk of impairment due to the cost
ofliving crisis and high inflation impacting the brewing sector.
Theestimated recoverable amount is subjective due to the
inherentuncertainty involved in forecasting and discounting
futurecashflows.
The effect of these matters is that, as part of our risk assessment,
we determined that the valuation of investment in CMBC has a
high degree of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for the financial
statements as a whole. In conducting our final audit work, we
concluded that reasonably possible changes to the value in use
ofthe investment in CMBC would not be expected to result in
material impairment.
Our procedures included:
• Assessing component audit: We assessed the work performed
bythe associate audit team on the in scope component and
considered the results of that work on the associate’s
investmentvalue;
• Historical comparisons: We evaluated the historical accuracy of
management’s forecasting against actual results in the period.
• Our sector experience: We compared management’s discount
rate with our own calculation of the discount rate based on our
valuations experience and knowledge of the sector.
• Sensitivity analysis: We evaluated the appropriateness and
likelihood of management’s sensitivities and their impact of
theoverall impairment test outcome and performed our own
additional sensitivity analysis.
• Assessing transparency: We critically assessed the adequacy
ofthe Group’s disclosures in relation to the valuation of the
investment in associate.
Our results
• We found the valuation of the investment to be acceptable.
In the prior period we reported a key audit matter in respect of the valuation of financial instruments. While the Group continues to use interest rate swaps to manage exposure to interest rate
risk and the valuation of these instruments requires estimation, we have not identified material misstatements to the valuation in the last two periods and consider the valuation to be of lesser
importance to the users of the financial statements since the swaps do not expire for over a decade. As a result we have not identified this as a key audit matter in our report for this period.
In the prior period we also reported a key audit matter in respect of the accounting for the disposal of the brewing business. This was a one- off event in the prior period and therefore it is not
identified as a key audit matter in our report this period.
We performed the detailed tests above for each key audit matter rather than seeking to rely on any of the Group’s controls because our knowledge of the design of these controls indicated
that we would not be able to obtain the required evidence to support reliance on controls.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Group total assets £2,522.7 million
(2021: £2,467.9 million)
Group materiality
£12.3 million (2021: £9.0 million)
Total Assets
£0.6 million
Misstatements reported to the Audit Committee (2021: £0.6 million)
Group materiality
£5.5 million
Materiality applied to the audit of Marston’s sole associate, Carlsberg Marston’s
Brewing Company Limited (‘CMBC’) (2021: £5.6 million)
Contingent consideration fair value movement4, 6–(0.7)(0.7)–20.020.0
Net finance (costs)/income4, 6(91.0)109.018.0(92.5)26.4(66.1)
Profit/(loss) before taxation27.7135.7163.4(101.3)(69.8)(171.1)
Taxation4, 7(0.2)(26.0)(26.2)15.127.742.8
Profit/(loss) for the period from continuing operations27.5109.7137.2(86.2)(42.1)(128.3)
Discontinued operations
Profit for the period from discontinued operations8–––1.7289.4291.1
Profit/(loss) for the period attributable to equity shareholders27.5109.7137.2(84.5)247.3162.8
The results for the current period reflect the 52 weeks ended 1 October 2022 and the results for the prior period reflect the 52 weeks ended 2 October 2021.
1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary on page 167.
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109
GROUP INCOME STATEMENT CONTINUED
For the 52 weeks ended 1 October 2022
Earnings/(loss) per share:Note
2022
p
2021
p
Basic earnings/(loss) per share9
Total21.725.7
Continuing21.7(20.3)
Discontinued–46.0
Basic underlying earnings/(loss) per share 9
Total4.3(13.4)
Continuing4.3(13.6)
Discontinued–0.3
Diluted earnings/(loss) per share9
Total21.425.7
Continuing21.4(20.3)
Discontinued–46.0
Diluted underlying earnings/(loss) per share9
Total4.3(13.4)
Continuing4.3(13.6)
Discontinued–0.3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
110
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 1 October 2022
2022
£m
2021
£m
Profit for the period137.2162.8
Items of other comprehensive income that may subsequently be reclassified to profit or loss
Gains arising on cash flow hedges23.95.9
Transfers to the income statement on cash flow hedges17.019.7
Other comprehensive expense of associates(0.8)–
Tax on items that may subsequently be reclassified to profit or loss(10.2)1.7
29.927.3
Items of other comprehensive income that will not be reclassified to profit or loss
Remeasurement of retirement benefits23.317.5
Unrealised surplus on revaluation of properties105.859.1
Reversal of past revaluation surplus(34.3)(105.0)
Tax on items that will not be reclassified to profit or loss(20.5)(12.3)
74.3(40.7)
Other comprehensive income/(expense) for the period104.2(13.4)
Total comprehensive income for the period attributable to equity shareholders241.4149.4
Other comprehensive income/(expense) for the current and prior period relates wholly to continuing operations.
The results for the current period reflect the 52 weeks ended 1 October 2022 and the results for the prior period reflect the 52 weeks ended 2 October 2021.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
111
GROUP CASH FLOW STATEMENT
For the 52 weeks ended 1 October 2022
Note
2022
£m
2021
£m
Operating activities
Profit for the period 137.2162.8
Taxation26.2(43.5)
Net finance (income)/costs(18.0)66.2
Depreciation and amortisation44.242.7
Gain on disposal of subsidiary–(290.5)
Working capital movement31(31.8)(6.4)
Non-cash movements31(30.4)100.6
(Decrease)/increase in provisions and other non-current liabilities(7.0)2.3
Difference between defined benefit pension contributions paid and amounts charged(7.3)(7.0)
Dividends from associates19.4–
Income tax received1.57.5
Net cash inflow from operating activities134.034.7
Investing activities
Interest received0.90.5
Sale of property, plant and equipment and assets held for sale9.916.2
Purchase of property, plant and equipment and intangible assets(70.1)(46.6)
Disposal of subsidiary828.2228.0
Movement in trade loans–0.1
Finance lease capital repayments received2.71.2
Net transfer from/(to) other cash deposits300.2(1.2)
Net cash (outflow)/inflow from investing activities(28.2)198.2
Financing activities
Interest paid(79.4)(96.3)
Swap termination costs–(19.9)
Proceeds from sale of own shares–0.1
Repayment of securitised debt(37.4)(35.4)
Advance/(repayment) of bank borrowings25.0(80.1)
Net repayments of lease liabilities (8.5)(19.8)
(Repayment)/advance of other borrowings(10.0)10.0
Net cash outflow from financing activities(110.3)(241.4)
Net decrease in cash and cash equivalents30(4.5)(8.5)
The cash flows for the current period reflect the 52 weeks ended 1 October 2022 and the cash flows for the prior period reflect the 52 weeks ended 2 October 2021.
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MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
112
GROUP BALANCE SHEET
As at 1 October 2022
Note
1 October
2022
£m
2 October
2021
£m
Non-current assets
Intangible assets1035.136.1
Property, plant, and equipment112,111.01,984.2
Interests in associates12260.3277.4
Other non-current assets1317.915.9
Deferred tax assets14–47.6
Retirement benefit surplus1515.1–
Derivative financial instruments161.8–
2,441.22,361.2
Current assets
Derivative financial instruments163.3–
Inventories1712.612.9
Trade and other receivables1830.152.3
Current tax assets–1.0
Other cash deposits3.03.2
Cash and cash equivalents27.732.2
76.7101.6
Assets held for sale194.85.1
81.5106.7
Current liabilities
Borrowings20(64.1)(67.5)
Trade and other payables22(204.4)(220.7)
Current tax liabilities(1.2)–
Provisions for other liabilities and charges23(1.0)(1.5)
(270.7)(289.7)
Non-current liabilities
Borrowings20(1,560.6)(1,571.8)
Derivative financial instruments16(25.5)(170.5)
Other non-current liabilities24(6.5)(5.5)
Provisions for other liabilities and charges23(3.3)(9.6)
Deferred tax liabilities14(8.0)–
Retirement benefit obligations15–(14.4)
(1,603.9)(1,771.8)
Net assets648.1406.4
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
113
GROUP BALANCE SHEET CONTINUED
As at 1 October 2022
Note
1 October
2022
£m
2 October
2021
£m
Shareholders’ equity
Equity share capital2848.748.7
Share premium account334.0334.0
Revaluation reserve417.1360.5
Capital redemption reserve296.86.8
Hedging reserve(50.7)(81.4)
Own shares29(110.9)(111.1)
Retained earnings3.1(151.1)
Total equity648.1406.4
The financial statements were approved by the Board and authorised for issue on 7 December 2022 and are signed on its behalf by:
ANDREW ANDREA
CHIEF EXECUTIVE OFFICER
7 December 2022
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
114
GROUP STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 1 October 2022
Equity
share
capital
£m
Share
premium
account
£m
Revaluation
reserve
£m
Capital
redemption
reserve
£m
Hedging
reserve
£m
Own shares
£m
Retained
earnings
£m
Total equity
£m
At 3 October 202148.7334.0360.56.8(81.4)(111.1)(151.1)406.4
Profit for the period––––––137.2137.2
Remeasurement of retirement benefits––––––23.323.3
Tax on remeasurement of retirement benefits––––––(5.8)(5.8)
Gains on cash flow hedges––––23.9––23.9
Transfers to the income statement on cash flow hedges––––17.0––17.0
Tax on hedging reserve movements––––(10.2)––(10.2)
Other comprehensive expense of associates––––––(0.8)(0.8)
Property revaluation––105.8––––105.8
Property impairment––(34.3)––––(34.3)
Deferred tax on properties––(14.7)––––(14.7)
Total comprehensive income––56.8–30.7–153.9241.4
Share-based payments––––––0.50.5
Sale of own shares–––––0.2(0.2)–
Transfer disposals to retained earnings––(0.2)–––0.2–
Changes in equity of associates––––––(0.2)(0.2)
Total transactions with owners––(0.2)––0.20.30.3
At 1 October 202248.7334.0417.16.8(50.7)(110.9)3.1648.1
Further detail in respect of the Group’s equity is provided in notes 28 and 29.
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MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
115
GROUP STATEMENT OF CHANGES IN EQUITY CONTINUED
For the 52 weeks ended 2 October 2021
Equity
share
capital
£m
Share
premium
account
£m
Revaluation
reserve
£m
Merger
reserve
£m
Capital
redemption
reserve
£m
Hedging
reserve
£m
Own shares
£m
Retained
earnings
£m
Total
equity
£m
At 4 October 202048.7334.0430.623.76.8(108.7)(111.9)(374.3)248.9
Profit for the period–––––––162.8162.8
Remeasurement of retirement benefits–––––––17.517.5
Tax on remeasurement of retirement benefits–––––––(2.5)(2.5)
Gains on cash flow hedges–––––5.9––5.9
Transfers to the income statement on cash flow hedges–––––19.7––19.7
Tax on hedging reserve movements–––––1.7––1.7
Property revaluation––59.1–––––59.1
Property impairment––(105.0)–––––(105.0)
Deferred tax on properties––(9.8)–––––(9.8)
Total comprehensive (expense)/income––(55.7)––27.3–177.8149.4
Share-based payments–––––––1.21.2
Sale of own shares––––––0.8(0.7)0.1
Transfer disposals to retained earnings––(15.1)(23.7)–––38.8–
Transfer tax to retained earnings––0.7––––(0.7)–
Changes in equity of associates–––––––6.86.8
Total transactions with owners––(14.4)(23.7)––0.845.48.1
At 2 October 202148.7334.0360.5–6.8(81.4)(111.1)(151.1)406.4
Further detail in respect of the Group’s equity is provided in notes 28 and 29.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
116
NOTES
For the 52 weeks ended 1 October 2022
New standards continued
IFRS 3Business Combinations
Reference to the Conceptual Framework
1 January 2022
IFRS 10 Consolidated Financial Statements
Amendments regarding the sale or contribution of assets between
an investor and its associate or joint venture
Date deferred
IFRS 16Leases
Amendments regarding seller-lessor subsequent measurement in a
sale and leaseback transaction
1 January 2024
IFRS 17Insurance Contracts
New accounting standard
1 January 2023
IAS 1 Presentation of Financial Statements
Amendments regarding the classification of liabilities
1 January 2023
Amendments regarding the disclosure of accounting policies1 January 2023
Amendments in non-current liabilities regarding long-term debt
withcovenants
1 January 2024
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
Amendments regarding the definition of accounting estimates
1 January 2023
IAS 12 Income Taxes
Amendments regarding deferred tax on leases and
decommissioning obligations
1 January 2023
IAS 16 Property, Plant and Equipment
Amendments prohibiting an entity from deducting from the cost of
property, plant and equipment amounts received from selling items
produced while the entity is preparing the asset for its intended use
1 January 2022
IAS 28Investments in Associates and Joint Ventures
Amendments regarding the sale or contribution of assets between
an investor and its associate or joint venture
Date deferred
IAS 37Provisions, Contingent Liabilities and Contingent Assets
Amendments regarding the costs to include when assessing whether
a contract is onerous
1 January 2022
1 ACCOUNTING POLICIES
The Group’s principal accounting policies are set out below:
Basis of preparation
These consolidated financial statements for the 52 weeks ended 1 October 2022 (2021:
52weeks ended 2 October 2021) have been prepared in accordance with UK-adopted
international accounting standards. The financial statements have been prepared under the
historical cost convention as modified by the revaluation of certain items, principally effective
freehold land and buildings, certain financial instruments, retirement benefits and share-
based payments, as explained below.
New standards
The International Accounting Standards Board (IASB) have issued the following new or revised
standards with an effective date for financial periods beginning on or after the dates disclosed
below. These standards have not yet been adopted by the Group. The IASB have also issued
anumber of minor amendments to standards as part of their Annual Improvements to IFRS.
It is not anticipated that any of the unadopted new standards will have a material impact on
the Group’s results or financial position.
Going concern
The cost-of-living crisis and the impact of COVID-19 has led to lower profit and operating
cashflows than would otherwise have resulted had these macroeconomic conditions not
existed. As a result of this there remains uncertainty about the future financial performance
ofthe Group and the Company, which could cast significant doubt over the Group’s ability
totrade as a going concern.
The Group’s sources of funding include its securitised debt, a £280.0 million bank facility
available until 2024, of which £215.0 million was drawn at 1 October 2022, a £40.0 million
private placement in place until 2024, and a £5.0 million seasonal overdraft facility which
extends to £20.0 million from 25 January to 6 May and 1 July to 12 August each year.
There are two covenants associated with both the Group’s securitised debt - free cash flow
todebt service coverage ratio (FCF DSCR) and Net Worth. The FCF DSCR is a measure of free
cash flow to debt service for the group headed by Marston’s Pubs Parent Limited and is
required to be a minimum of 1.1 over both a two-quarter and four-quarter period, and the
NetWorth is derived from the net assets of that group of companies. There washeadroom
of£432.4 million on the Net Worth Covenant, headroom of 0.2 on the two-quarter FCF DSCR
Covenant and headroom of 0.2 on the four-quarter FCF DSCR Covenant at1 October 2022.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
117
NOTES CONTINUED
For the 52 weeks ended 1 October 2022
The Directors have also considered a severe but plausible downside scenario, incorporating
a5% reduction in sales volumes from the cost-of-living crisis. It has been assumed that variable
costs will move in line with the change in sales volumes and a further 2% price increase can
betaken to mitigate some of the volume decline. The Group has identified further mitigating
actions that could be taken including a deferral of an element of the planned maintenance
expenditure, as well as a deferral of investment capital expenditure, in periods with lower
liquidity headroom. The conclusion of this assessment was that the Directors are satisfied that
the Group has adequate liquidity to withstand such a severe but plausible downside scenario.
However, as above, the bank and private placement covenants are forecast to be breached
in 2023 commencing from the 31 December 2022 test date; the forecast breaches that will
require further amendments result from the continued recovery from COVID-19 and the impact
of Omicron in H1.
On both the base case and severe but plausible downside case there is adequate headroom
forecast throughout the period under review. However, as the forecasts indicate that covenants
are expected to be breached within the next 12months, the Directors have concluded that a
material uncertainty over going concern exists. The Group is in negotiations with its lenders and,
on the basis of the previous covenant waivers and amendments secured, and the return to
pre-pandemic levels of trading during the current financial period, the Directors expect to be
able to secure covenant amendments for financial year 2023 before 31 December 2022.
Considering the above, the Directors are satisfied that the Group and the Company have
adequate resources to continue in operational existence for the foreseeable future, being at
least12 months from the date of signing these financial statements. For this reason, the Directors
continue to adopt the going concern basis of accounting in preparing these financial statements.
However, a material uncertainty exists, in particular with respect to the ability to achieve the
required covenant amendments, which may cast significant doubt on the Group’s ability to
continue as a going concern and, therefore, to continue realising its assets and discharging its
liabilities in the normal course of business. The financial statements do not include any adjustments
that would result from the basis of preparation being inappropriate.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of Marston’s PLC
and all of its subsidiary undertakings. The results of subsidiary undertakings are included in
theGroup accounts from the date on which control transferred to the Group or, in the case of
disposals, up to the date when control ceased. The Group controls an entity when it is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. In assessing control, the Group takes into
consideration potential voting rights. Transactions between Group companies are eliminated
on consolidation.
1 ACCOUNTING POLICIES CONTINUED
Going concern continued
There are two covenants associated with the Group’s bank and private placement borrowings
for the non-securitised group of companies. The Debt Cover covenant is a measure of net
borrowings to EBITDA (a maximum of 5.0 times from 1 October 2022, reducing on a stepped
basis to 3.5 times from 1 April 2023). The Interest Cover covenant is a measure of EBITDA to
finance charges, which is a minimum of 1.2 times from 1 October 2022, rising on a stepped
basis to 2.0 times from 1 July 2023 for the Group’s bank borrowings and 3.0 times from 1 April
2023 for the private placement borrowings. There was headroom of 0.2 on the Debt Cover
covenant and headroom of 0.4 on the Interest Cover covenant at 1 October 2022. There are
additional Liquidity and Unencumbered Asset Cover covenants for the Group’s private
placement borrowings only. The Liquidity covenant is a measure of headroom on the Group’s
bank and private placement borrowings, which is a minimum of £75 million on the last day of
each fiscal month from 30 September 2022, increasing to £100 million from 31 January 2023.
The Unencumbered Asset Cover covenant is a measure of tangible assets of the non-
securitised group of companies to net borrowings, which is a minimum of 1.5 as at 1 October
2022. Liquidity was £78 million against the covenant level of £75 million and headroom was 0.1
on the Unencumbered Asset Cover covenant at 1 October 2022.
The Directors have performed an assessment of going concern over the period of 12 months
from the date of signing these financial statements, to assess the adequacy of the Group’s
financial resources. In performing their assessment, the Directors considered the Group’s
financial position and exposure to principal risks, including the cost-of-living crisis and the
continuing impact of COVID-19. The Group’s base case forecasts assume an increase in sales
volumes, below inflation sales price rises, and below inflation operational cost increases as a
result of the Group’s gas prices being fixed until 2025 and electricity prices fixed throughout
the upcoming winter. The Debt Cover and Interest Cover bank and private placement
covenants, and private placement Unencumbered Asset Cover covenant, are forecast to
bebreached in 2023 commencing from the 31 December 2022 test date such that covenant
amendments will be required for this quarter and potentially subsequent quarters in the 2023
financial year. In respect of the Liquidity covenant associated with the Group’s £40 million
private placement borrowings for the fiscal month ending on or about 31 October 2022, there
was a technical default, for which waivers have been secured (see note 35). The Group also
obtained prospective waivers from its private placement provider for the fiscal months
endingon or about 30 November 2022 and 31 December 2022 Liquidity covenants and
furtheramendments to this Liquidity covenant will be required during the year. The forecast
breaches that will require further covenant amendments result from the continued recovery
from COVID-19 and the impact of Omicron in H1.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
118
NOTES CONTINUED
For the 52 weeks ended 1 October 2022
The Group provides accommodation to customers in its public houses and lodges. Revenue
from the provision of accommodation is recognised over the period of the customer’s stay.
Payment of the transaction price is due at the time of the customer’s stay.
The Group provides gaming machines for customers to play in its pubs. Revenue from gaming
machines is recognised when the game has been played. Payment of the transaction price is
due when the game is played.
In respect of its franchised arrangements, where the Group controls the above goods or
services before those goods or services are transferred to the customer, the associated
income is included within the Group’s revenue.
Wholesale sales – continuing
The Group sells drinks to tenants of its licensed properties. Revenue is recognised when the
Group has transferred control of the goods to the customer. This occurs when the goods have
been delivered to the customer, the customer has obtained legal title to the goods, the Group
cannot require the return or transfer of the goods and the customer has an unconditional
obligation to pay for the goods.
The Group has discretion in establishing the price of goods delivered to the customer and the
Group is responsible for fulfilling the promise to provide the specified goods.
A receivable is recognised when the goods are delivered, and payment is due in line with
each customer’s individual credit terms. These terms are all less than one year and as such no
element of financing is considered to be present.
The Group’s revenue from contracts with customers in respect of discontinued operations
comprised wholesale sales and contract services.
Wholesale sales – discontinued
The Group sold drinks to wholesalers, retailers and other pub operators. Revenue was
recognised when the Group had transferred control of the goods to the customer. This
occurred when the goods had been delivered to the customer, the customer had obtained
legal title to the goods, the Group could not require the return or transfer of the goods and the
customer had an unconditional obligation to pay for the goods.
Drinks were often sold with retrospective volume discounts based on sales over a defined
period. The anticipated discounts were estimated based on accumulated experience using
the expected value method and were deducted from the sales price that was recognised in
revenue. A refund liability was recognised within trade and other payables for the volume
discounts expected to be paid in respect of sales made prior to the balance sheet date.
Contract services – discontinued
The Group brewed and packaged drinks for customers. Revenue was recognised when the
Group had transferred control of the goods to the customer. This occurred when the goods
had been delivered to the customer, the customer had obtained legal title to the goods and
the customer had an unconditional obligation to pay for the goods.
1 ACCOUNTING POLICIES CONTINUED
The Group has applied the purchase method in accounting for the acquisition of subsidiaries.
The cost of an acquisition is measured as the fair value of the consideration paid and deferred.
Identifiable assets acquired and liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. Acquisition costs are expensed as incurred.
The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable
net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value
of the Group’s share of the identifiable net assets of the subsidiary acquired, the difference is
recognised immediately in the income statement.
When the Group loses control of a subsidiary the carrying amounts of the assets and liabilities
of that subsidiary are derecognised at the date when control is lost. The fair value of the
consideration received is recognised alongside any investment retained in the former
subsidiary at the date that control is lost. Any resulting difference is recognised in full as a
gainor loss under IFRS 10 ‘Consolidated Financial Statements’.
The consolidated financial statements incorporate the results of Marston’s Issuer PLC and its
parent company, Marston’s Issuer Parent Limited. Marston’s Issuer PLC was set up with the sole
purpose of issuing debt secured on assets owned by the Group. Wilmington Trust SP Services
(London) Limited holds the shares of Marston’s Issuer Parent Limited under a declaration of trust
for charitable purposes. The rights provided to the Group through the securitisation give the
Group power over these companies and the ability to use that power to affect its exposure
tovariable returns from them. As such the Directors of Marston’s PLC consider that these
companies are controlled by the Group, as defined in IFRS 10, and hence for the purpose of
the consolidated financial statements they have been treated as subsidiary undertakings.
The Group’s interests in associates are accounted for using the equity method. On initial
recognition the investment in an associate is recognised at cost and the carrying amount is
subsequently increased or decreased to recognise the Group’s share of the profit or loss, other
comprehensive income and changes in equity of the associate after the date of acquisition.
The net investment in an associate is impaired and impairment losses are incurred if, and only
if, there is objective evidence of impairment as a result of events that occurred after the initial
recognition of the net investment which have an impact on the estimated future cash flows
that can be reliably estimated.
Revenue and other operating income
The Group’s revenue from contracts with customers in respect of continuing operations
comprises outlet sales and wholesale sales.
Outlet sales – continuing
The Group sells food and drink to customers in its pubs. Revenue from the sale of food and
drink is recognised when the goods are sold to the customers in the pubs. Payment of the
transaction price is due immediately when the goods are provided to the customer.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
119
NOTES CONTINUED
For the 52 weeks ended 1 October 2022
Details in respect of non-underlying
1
items recognised in the current and prior period
areprovided in notes 4 and 8. Material judgements in respect of the classification of non-
underlying
1
items in the current period related to the impairment of freehold and leasehold
properties and the interest rate swap movements. The impairment of freehold and leasehold
properties and the interest rate swap valuation movement were considered to be non-
underlying
1
as they were significant items that resulted primarily from movements in external
market variables rather than reflecting the underlying
1
trading performance of the Group.
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and any impairment
losses. Intangible assets arising on an acquisition are recognised separately from goodwill
ifthe fair value of these assets can be identified separately and measured reliably.
Amortisation is calculated on a straight-line basis over the estimated useful life of the
intangible asset. Where the useful life of the asset is considered to be indefinite no annual
amortisation is provided but the asset is subject to annual impairment reviews. Impairment
reviews are carried out more frequently if events or changes in circumstances indicate that the
carrying value of an asset may be impaired. Any impairment of carrying value is charged to
the income statement. The useful lives of the Group’s intangible assets are:
Computer software5 to 20 years
Property, plant, and equipment
• Land and buildings which are either freehold or are in substance freehold assets are
classed as effective freehold land and buildings. This includes leasehold land and buildings
with a term exceeding 100 years at acquisition/commencement of the lease or where there
is an option to purchase the freehold at the end of the lease term for a nominal amount.
Allother leasehold land and buildings are classed as leasehold land and buildings.
• Effective freehold land and buildings are initially stated at cost and subsequently at
valuation. Leasehold land and buildings, plant and machinery and fixtures, fittings, tools
and equipment are stated at cost.
• Depreciation is charged to the income statement on a straight-line basis to provide for the
cost or valuation of the assets less their residual values over their useful lives.
• Land and buildings are depreciated to their residual values over the lower of the lease term
(where applicable) and 50 years.
• Plant and machinery and fixtures, fittings, tools and equipment are depreciated over
periods ranging from 3 to 15 years.
• Own labour and interest costs directly attributable to capital projects are capitalised.
1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary
on page 167.
1 ACCOUNTING POLICIES CONTINUED
The Group also transported and delivered goods for customers. Revenue was recognised over
time as the Group transported the goods; due to the short distances the goods were transported
this was equivalent to recognising revenue at the point when the goods were delivered to the
required location.
Revenue is recorded net of discounts, intra group transactions, VAT and excise duty relating to
the brewing and packaging of certain products.
The Group has elected to apply the practical expedient in paragraph 63 of IFRS 15 ‘Revenue
from Contracts with Customers’ whereby the promised amount of consideration is not adjusted
for the effects of a significant financing component if it is expected that payment will be
received within one year.
Rental income
The Group also includes rent receivable from tenants of its licensed properties within revenue
from continuing operations. This income is recognised in the period to which it relates.
Other operating income
Other operating income in the prior period mainly comprised amounts receivable under the
Coronavirus Job Retention Scheme and COVID-19 assistance grants from local authorities.
These are recognised in the period to which they relate.
Operating segments
The Group is considered to have one operating segment under IFRS 8 ‘Operating Segments’
and no disclosures are presented. This is in line with the reporting to the chief operating
decision maker and the operational structure of the business. The measure of profit or loss
reviewed by the chief operating decision maker is underlying profit/loss before tax for the total
of continuing and discontinued operations.
Non-underlying
1
items
In order to illustrate the underlying
1
performance of the Group, presentation has been made
ofperformance measures excluding those items which it is considered would distort the
comparability of the Group’s results. Non-underlying
1
items are defined as those items of
income and expense which, because of the materiality, nature and/or expected infrequency
of the events giving rise to them, merit separate presentation to enable users of the financial
statements to better understand elements of financial performance in the period, so as to
facilitate comparison with future and prior periods. As management of the freehold and
leasehold property estate is an essential and significant area of the business, the threshold for
classification of property related items as non-underlying
1
is higher than other items.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
120
NOTES CONTINUED
For the 52 weeks ended 1 October 2022
Where there is an indication that any previously recognised impairment losses no longer exist or
have decreased, a reversal of the loss is made if there has been a change in the estimates used
to determine the recoverable amounts since the last impairment loss was recognised. The
carrying amount of the asset is increased to its recoverable amount only up to the carrying
amount that would have resulted, net of depreciation or amortisation, had no impairment loss
been recognised for the asset in prior periods. The reversal is recognised in the income statement
unless the asset is carried at a revalued amount. The reversal of an impairment loss on a revalued
asset is recognised in other comprehensive income and increases the revaluation surplus for that
asset. However, to the extent that an impairment loss on the same revalued asset was previously
recognised in the income statement, the reversal of that impairment loss is recognised in the
income statement. The depreciation charge is adjusted in future periods to allocate the asset’s
revised carrying value, less any residual value, on a systematic basis over its remaining useful life.
There is no reversal of impairment losses relating to goodwill.
Leases
At the inception of a contract the Group assesses whether that contract is, or contains,
alease. This is the case if the contract conveys the right to control the use of an identified
assetfor a period of time in exchange for consideration. The Group has taken the practical
expedient in paragraph C3 of IFRS 16 ‘Leases’ not to reassess whether an existing contract is
orcontains a lease at the date of initial application and as such the IFRS 16 definition of a
lease has only been applied to contracts which were entered into or amended on or after
29September 2019.
The lease term is determined as the non-cancellable period of a lease together with periods
covered by an option to extend the lease if the Group is reasonably certain to exercise that
option and the periods covered by an option to terminate the lease if the Group is reasonably
certain not to exercise that option.
The Group has elected not to apply the lessee requirements of IFRS 16 to short-term leases and
leases for which the underlying asset is of low value. The lease payments for such leases are
recognised as an expense on a straight-line basis over the lease term. For all other leases
where it is the lessee the Group recognises a lease liability and a right-of-use asset at the
commencement date of the lease.
The lease liability is recognised as the present value of the lease payments discounted using
either the interest rate implicit in the lease or, where that rate cannot be readily determined,
the Group’s incremental borrowing rate. The lease payments include variable payments that
depend on an index or rate and the exercise price of a purchase option if it is reasonably
certain that it will be exercised. The lease liability is subsequently increased to reflect the
interest thereon, reduced by the lease payments made and remeasured to reflect any
reassessments or lease modifications, such as a change in future lease payments resulting
froma change in an index or rate or a change in the lease term.
1 ACCOUNTING POLICIES CONTINUED
Residual values and useful lives are reviewed and adjusted if appropriate at each balance
sheet date. The Group’s effective freehold land and buildings in respect of its pub estate are
considered to have a residual value equal to their current valuation and as such no
depreciation is charged on these assets.
Effective freehold land and buildings are revalued by qualified valuers on an annual basis
using open market values so that the carrying value of an asset does not differ significantly
from its fair value at the balance sheet date. The annual valuations are determined via
third-party inspection of approximately a third of the sites such that all sites are individually
inspected every three years. Substantially all of the Group’s effective freehold land and
buildings have been valued by a third-party in accordance with the Royal Institution of
Chartered Surveyors’ Red Book. These valuations are performed directly by reference to
observable prices in an active market or recent market transactions on arm’s length terms.
Internal valuations are performed on the same basis.
For effective freehold land and buildings, revaluation losses are charged to the revaluation
reserve to the extent that a previous gain has been recorded for that effective freehold asset,
and thereafter to the income statement. Surpluses on revaluation are recognised in the
revaluation reserve, except to the extent that they reverse previously charged impairment
losses for an effective freehold asset, in which case the reversal is recorded in the income
statement.
The effective freehold property estate is assessed at each reporting date to ensure that the
carrying amount does not differ materially from that which would be determined using fair
value at the end of the reporting period. This is consistent with the requirements of IAS 16
‘Property, Plant and Equipment’.
Disposals of property, plant and equipment
Profit/loss on disposal of property, plant and equipment represents net sale proceeds less the
carrying value of the assets and any associated lease liabilities. Any element of the revaluation
reserve relating to the property disposed of is transferred to retained earnings at the date of sale.
Impairment
If there are indications of impairment or reversal of impairment, an assessment is made of
therecoverable amount of each significant cash generating unit, which is performed at an
individual site level. An impairment loss is recognised where the recoverable amount is lower
than the carrying value of assets, including goodwill. The recoverable amount is the higher of
value in use and fair value less costs to sell. The impairment loss is recognised in the income
statement unless the asset is carried at a revalued amount, in which case the impairment loss is
charged to the revaluation reserve to the extent that a previous gain has been recorded, and
thereafter to the income statement.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022
121
NOTES CONTINUED
For the 52 weeks ended 1 October 2022
Financial instruments
The Group classifies its financial assets in one of the following two categories: at fair value
through profit or loss and at amortised cost. The Group classifies its financial liabilities in one of
the following two categories: at fair value through profit or loss and other financial liabilities.
The Group classifies a financial asset as at amortised cost if the asset is held within a business
model whose objective is to hold financial assets in order to collect contractual cash flows and
the contractual terms of the asset give rise on specified dates to cash flows that are solely
payments of principal and interest.
Financial instruments at fair value through profit or loss
Derivatives are categorised as financial instruments at fair value through profit or loss unless
they are designated as part of a hedging relationship. Contingent consideration is also
categorised as at fair value through profit or loss as it does not give rise on specified dates
tocash flows that are solely payments of principal and interest. The Group holds no other
financial instruments at fair value through profit or loss.