Marston's PLC (the "Company")
Annual Report and Accounts and Notice of Annual General Meeting 2020
The following documents have now been posted or otherwise made available to shareholders:
· 2019 Annual Report and Accounts;
· Notice of Annual General Meeting to be held on 24 January 2020 ("AGM Notice");
· Form of Proxy.
In accordance with LR 9.6.1R, a copy of each of these documents has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM.
As required by DTR 6.3.5R(3), the Company confirms that the 2019 Annual Report and Accounts and AGM Notice are now available to view or download in PDF format from the Marston's PLC website: www.marstons.co.uk/investors/
A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Company's preliminary results announcement on 27 November 2019. That information together with the information set out below, which is extracted from the 2019 Annual Report and Accounts, constitute the requirements of DTR 6.3.5 which is to be communicated via an RIS in unedited full text. This announcement is not a substitute for reading the full 2019 Annual Report and Accounts. Page and note references in the text below refer to page numbers in the 2019 Annual Report and Accounts. To view the preliminary announcement, slides of the results presentation and audio webcast please visit www.marstons.co.uk/investors/results-presentations/.
For further information, please contact:-
Anne-Marie Brennan
Group Secretary
01902 329163
Additional information
Our Principal Risks and Uncertainties
The following risks are recognised by the Board to be the principal risks that could impact upon the operation of the business strategy. This is not intended to be a complete analysis of all the risks, which may change over time.
All the principal risks listed have an impact upon the two key components of our strategy, which are:
1. Operating a high quality pubs and rooms business offering great places to drink, eat and stay.
2. Operating a 'best in class' beer business with a wide range of premium and local brands and great service.
Market/operational
| Risk context | The risk | Potential impact | Mitigation |
| Our revenue is dependent upon being able to offer, and attract, our guests to an enjoyable experience, of high quality at the right price. It is reliant upon attracting back existing guests and winning new guests. | That our pubs, brands or services fail to attract guests, do not reflect changing consumer preferences, or offer poor service or quality. Equally there is a risk that our prices become uncompetitive.
| Reduction in sales, or heavy discounting in order to attract customers.
| • Continual assessment of guest preferences: market and consumer insight data. • Continual analysis of sales performance data of individual sites and by pub format. • Pricing strategy, built upon careful analysis at sufficient detail of guests' sensitivities. • Marketing, including digital marketing campaigns. • Cost control, including menu margin analysis. • Investment, location and design of our pubs. |
| Movement: The UK economy has been in a period of uncertainty in recent years. Currently the economic drivers for our guests remain similar to previous years as the country pulls away from the EU - employment uncertainty, depreciation in the value of sterling and the threat of inflation. This creates a risk for our Group in attracting guests and setting prices at an appropriate level. | |||
| Opportunity: The market conditions present an opportunity to gain market share from other operators exiting the market, or who cannot manage the risk as effectively. | |||
Business continuity
| Risk context | The risk | Potential impact | Mitigation |
| The continuous operation of our business is dependent upon the uninterrupted running of our IT network, site links and the internet. In addition Marston's operations are heavily dependent on the continual supply of goods and services often from single sources. | Disruption to key suppliers, particularly those closely involved with our day-today activities (logistics, food, drink), or shortage of commodities could significantly impact Marston's operations. The impact of Brexit on the efficiency of supply of fresh food to our business is an uncertain threat in the short term. | Disruption to trade impacting upon profit. | · Continual assessment of suppliers' resilience and capacity. · Site visits to our suppliers to assess crisis planning. · Contingency planning identifying how products or services can be substituted. · IT defences, including dual server capacity, dual network links and rehearsed recovery plans. |
| Movement: An internal audit this year of our network resilience confirmed that investment into additional links and upgraded technology has significantly reduced the likelihood of external threats impacting upon our computer operations. | |||
| Opportunity: Our business reputation for continually high quality products and services continues to grow in the minds of our customers. We have a reputation for hard work, dependency and care which helps us to win contracts and create trading relationships. | |||
Food safety
| Risk context | The risk | Potential impact | Mitigation |
| Our guests' need for safe and reliable information on the food ingredients within our products has never been higher.
Food hygiene is fundamental to us and the safety we guarantee to our guests.
| Breaches of food standards regulations now attract increased media attention and higher penalties.
Our customers trust in our high standards of food hygiene. That trust could quickly be eroded by individual incidents.
| Increased regulation directly affecting Marston's, or our suppliers, could increase the cost of compliance.
| • Maintain excellent levels of compliance through policies, training and monitoring. • Working with our supply chain to maintain robust systems for identifying constituent food ingredients. • Due diligence on accepting new suppliers, monitoring and auditing. • Tracking meal constituents all the way through to our menus and the descriptions contained therein and the accompanying allergens lists supplied to our team members and the public. • Rigorous investigation of complaints. • Tracking legislative changes and adapting operations. |
| Movement: Public concern over allergens is growing. Media coverage of the tragic consequences when allergens are unknowingly consumed have increased the public expectation that retailers should do more to protect consumers. | |||
| Opportunity: There is an opportunity for Marston's reputation to grow in our guests' appreciation for the safety of food. We recognise that the reliability of the information given to our team members, their training, and their care to engage with this matter is key. | |||
Health and safety
| Risk context | The risk | Potential impact | Mitigation |
| The safety of our customers, our people and the public underpins all our activities. We seek to attain the highest levels of safety. Lapses of safety damage the trust and reputation of our Group. | Breaches of health and safety or food hygiene regulations now attract increased media attention and higher penalties. | Significant damage to reputation.
| • Health, safety and hygiene management systems embedded. • Dedicated safety advisers seeking continuous improvement. • Regular independent expert safety audits at our pubs. • Training of team members. • Escalation of potential safety threats to senior operational management. |
| Movement: During 2018/19, we have taken steps to invest in more resource for health and safety by employing the services of three additional Regional Safety Advisers to support our pub teams.
Breaches of safety are taken seriously by all levels of our business. When our systems of control are found to be at fault we confront any failing honestly, in order to learn and build stronger processes for the future. | |||
| Opportunity: In a competitive marketplace there is an increased opportunity to be differentiated in our guests' minds by absolute commitment to guest care, thereby building long-term trust. | |||
Information technology
| Risk context | The risk | Potential impact | Mitigation |
| Our business is very reliant upon the Group's IT network to communicate, operate effectively, serve our customers, process transactions and report on results. | Threats to IT are both external and internal and could result in a network outage, loss, theft or corruption of data or denial of service. | Reduction in the effectiveness of operations, business interruption and loss of profit. Regulatory fines as a result of the loss of data. | • Anti-virus and firewall protection. • Access control, password protection and IT policy adherence. • Network controls and monitoring. • Penetration testing and remediation. • Backup procedures. • Data recovery plans and rehearsals. |
| Movement: Global cyber risk has evolved in recent years, theft of personal data is becoming more common, ransomware attacks are now more widespread, and attacks are more sophisticated.
Marston's has conducted penetration testing on its network for many years. Specific cyber risk reviews have been conducted in recent years on IT security by independent teams. We have invested in additional network and device monitoring functionality. | |||
| Opportunity: Our engagement with customers creates increasing digital marketing opportunities for which the security and continuity of our IT network, as well as the trust of our customers, is fundamental. | |||
Our people
| Risk context | The risk | Potential impact | Mitigation |
| Marston's operates in a very competitive environment. There is an increasing demand for high calibre people, particularly in our pubs where Brexit does have an impact tightening the labour market. The ability to achieve our strategic objectives has a heavy reliance upon the quality and training of our people.
| Failure to attract or retain the best people.
| Reduction in customer satisfaction levels.
Financial targets and strategic objectives not being met. | • Continual awareness of our people offer compared to our competitors through participation in appropriate networks. • Improved training, induction and development programmes. • Development of Marston's 'People Promise'. • Employee appraisals and development programmes - Performance, Career and Development Review (PCDR). • Employee engagement survey and identifying action points for teams. • Increased focus on the development of our line managers to improve employee retention. |
| Movement: The sustained growth in our business has allowed for improvements in training programmes and given more opportunity for our people to progress.
Our PCDR cycle, now in its third year, has brought a common approach to people development across the Group. PCDR enhances the dialogue with employees on expectation, achievement and career progression. | |||
| Opportunity: The continual investment in our people creates an opportunity to retain and develop the most talented and committed individuals and to remain a very attractive employer when advertising roles. | |||
Financial covenants and accounting controls
| Risk context | The risk | Potential impact | Mitigation |
| The Group's financial system handles a large number of transactions accurately and securely. Accurate reporting is key to running the business effectively, and in compliance with our financial covenants.
| Breach of the covenants with our lenders.
Incorrect reporting of financial results.
Unauthorised transactions.
| Loss of investor confidence and reputational damage. Potential loss as a result of fraud. Breach of covenants, resulting in additional financial operating restrictions. | • Regular detailed management accounts, budgets and forecasts. • Constant monitoring of financial ratios. • Internal and external audits. • Segregation of duties. • Access controls within our systems. • Levels of authority. |
| Movement: There are strong controls mitigating this risk to a low level. There has been no change in the risk since last year. | |||
| Opportunity: Significant new investment over the last two years in our pub financial system has created a unique opportunity to better understand our guests' spend. We have developed our capability to analyse this data to a depth not possible before. The system has improved our ability to target offers to customers in a focused way, to roll out marketing campaigns and to price our offers to guests quickly across the whole of our pub estate. | |||
Political
| Risk context | The risk | Potential impact | Mitigation |
| The way in which the UK leaves the EU is currently uncertain. There is a risk that no deal is agreed and that there is a 'hard' exit.
| A no-deal Brexit will impact upon the deliveries of supplies from the EU, in particular for us those goods which we cannot stockpile and where there are no alternative UK supplies at the same cost level for the quality and quantity required, namely fresh meat, vegetables and fruit. | A 'no deal' scenario would impact upon our costs to import food and drink due to currency fluctuation, tariffs and inflation. Our ability to export beer could also be impacted by new tariffs. It may be harder to secure long-term agreements with our suppliers. Border delays could disrupt our supply chain impacting upon the availability of food and drink brands to our pubs and our customers' businesses. The UK job market could continue to be less desirable for EU nationals which could increase the shortage of specific types of skilled workers within our market sector.
| • Continual assessment of supply contracts and renegotiation of terms when they fall due, to protect our business from Brexit related costs. • Where feasible, working with our key suppliers to hold stocks in the UK of food and drink which would be sufficient to cover short-term disruption. • Consider alternative sources of supply if our existing suppliers experience difficulty importing goods. • Review our agents and procedures for the accounting of customs duties and declarations. • Support those employees who are EU nationals staying and working in the UK. |
| Movement: Marston's recognises the disruptive effects that Brexit could have upon our business and the UK economy, particularly as the uncertainty continues to exist without a future trading agreement. | |||
| Opportunity: Brexit related risks are monitored closely by management and reported to the PLC Exec. The business is well-placed regarding the preparations it can make, and the understanding of the legal implications of trading with the EU. In 2019/20, we plan to seek independent assurance on our preparations for the transition to UK legislation and operations outside the EU once the UK has left. | |||
Statement of Directors' responsibilities in respect of the financial statements
The following responsibility statement is repeated here to comply with DTR 6.3.5. This statement relates to, and is extracted from, page 76 of the 2019 Annual Report and Accounts. Responsibility is for the full 2019 Annual Report and Accounts, not the extracted information presented in this announcement and the preliminary results announcement.
The Directors are responsible for preparing the Annual Report and Accounts and the financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. In preparing the financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· state whether applicable IFRS as adopted by the European Union have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 102, have been followed for the Company financial statements, subject to any material departures disclosed and explained in the financial statements;
· make judgements and accounting estimates that are reasonable and prudent; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's position, performance, business model and strategy.
Each of the Directors, whose names and functions are listed on pages 44 to 45 confirm that, to the best of their knowledge:
· the Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102, and applicable law), give a true and fair view of the assets, liabilities and financial position and loss of the Company;
· the Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and
· the Strategic Report together with the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors' Report is approved:
· so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and
· they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
| Ralph Findlay Chief Executive Officer | Andrew Andrea Chief Financial and Corporate Development Officer |
ENDS