Marston's H1 Earnings Call Highlights

Key Points

• Marston’s posted stronger profitability despite slightly lower sales, with first-half revenue down 1.1% to £422.7 million but underlying profit before tax up 7.9% to £20.5 million and EBITDA margin improving to 20.3%.
• New pub format conversions are becoming a major growth engine, as the company completed 60 conversions in the half-year and said converted pubs are delivering around 20% like-for-like sales growth and returns above its hurdle rate.
• Management remains upbeat on the full year, citing no repeat of first-half closure impacts, expected second-half sales uplift from the new formats, and a potential boost from the World Cup while keeping full-year guidance unchanged.

Marston's LON: MARS reported what management described as a strong first half of fiscal 2026, with profit growth and continued margin expansion despite softer sales and cost pressures across the hospitality market.

Chief Executive Officer Justin Platt said the pub operator made “excellent strategic progress” in the period, particularly through the rollout of its new pub formats. The company completed 60 conversions in the first half, ahead of its plan for 50, and said those sites have performed strongly since reopening.

“It’s been a really good first half for us,” Platt said. “That progress sets us up for a very strong year overall.” He added that Marston’s was maintaining its expectations for the full year.

Profit rises despite lower revenue

Chief Financial Officer Stephen Hopson said total revenue for the first half was £422.7 million, down 1.1% year over year. Like-for-like sales declined 0.5%, which Hopson said was ahead of the broader hospitality market. Revenue was also affected by temporary pub closures linked to the company’s refurbishment and format conversion program.

Hopson said the closure periods reduced first-half revenue by £2.2 million and EBITDA by £2 million. The average closure time for converted pubs was about three weeks.

EBITDA was £85.9 million, broadly flat from the prior year, while EBITDA margin increased 20 basis points to 20.3%. Underlying profit before tax rose 7.9% to £20.5 million, and earnings per share increased 9.1% to £0.024.

Hopson said the impact from closures would not repeat in the second half because the fiscal 2026 format program has been completed. The company now has 91 pubs trading under its new formats, including 31 converted in the prior year.

Format conversions become key growth driver

Management pointed to the new pub formats as a central part of Marston’s growth strategy. Hopson said the converted sites delivered like-for-like sales growth of around 20% in their post-opening periods, although the first-half contribution was limited because many reopened late in the period.

Platt said the company is no longer in “test and learn mode” with the formats, citing strong performance across its Grandstand, Two Door and Woodie’s concepts. He said the average return from the format program is currently about 35%, above the company’s 30% hurdle rate.

The Grandstand format was highlighted as a standout performer. Platt said those pubs have delivered around 30% like-for-like revenue growth, driven by higher visit frequency and a 7% increase in spend. He said Grandstand pubs have also gained about 1 percentage point of local market share on average in areas where they have launched.

Marston’s has mapped its estate against demographics and local populations and identified about 600 pubs as suitable for conversion, including roughly 250 potential Grandstand sites. Platt said the company plans to accelerate the rollout and expects to complete around 100 conversions next year, with exact numbers to be confirmed at the preliminary results in November.

Margins supported by productivity and cost controls

Hopson said Marston’s continued to expand margins despite cost headwinds, including increases to the National Living Wage and changes to National Insurance that took effect in April 2025. He said labor productivity improvements fully offset those pressures, helped by refinements to the company’s labor scheduling tools.

The company also cited revenue management, cost of goods management and other efficiencies as contributors to margin improvement. Excluding the impact of closure periods, Hopson said EBITDA margin increased 60 basis points year over year.

Energy costs were a headwind in the first half, but Hopson said that was due to a gas contract that came into effect in spring 2025 after the company had benefited from a long-term fixed gas contract for the previous five years. He said Marston’s is well hedged, with electricity prices fixed for the current financial year and gas pricing locked in until the end of fiscal 2027.

Platt said the company remained disciplined on discounting in a softer market. He said Marston’s used discounts selectively where they could enhance returns but avoided “trading the top line for the bottom line.”

Cash flow remains second-half weighted

Recurring free cash flow was an outflow of £15.6 million in the first half, reflecting seasonality, higher capital investment, working capital timing and tax payments. Hopson said the group remains confident it will deliver more than £50 million of recurring free cash flow for the full year.

Capital expenditure increased by £8 million year over year, reflecting the decision to complete the format investment program in the first half. Hopson said full-year capital expenditure is still expected to remain within the 7% to 8% of turnover range previously communicated by the company.

Marston’s continued to reduce leverage, with leverage excluding IFRS 16 leases declining to 4.7 times from 4.9 times a year earlier. Hopson said the company remains on track to reduce net debt to around 4 times by the end of the year.

The company’s balance sheet is underpinned by £2.2 billion of property assets, with 82% of the estate held as effective freeholds. Net assets increased 21% year over year to £812.9 million, while net asset value per share rose to £1.28.

Management points to second-half opportunities

Marston’s said it expects like-for-like sales to improve over the balance of the year, supported by the converted pubs and the upcoming World Cup. Hopson said the new formats are expected to add nearly £11 million of year-over-year sales upside in the second half, equivalent to 2.3% of total revenue growth.

Platt said the World Cup could provide a boost across the company’s community-based estate, particularly because of favorable kickoff times and the potential for wider consumer momentum around the tournament.

During the question-and-answer session, Platt said the company has protected opening hours across both its managed and partner estates. Hopson also said the board would consider future uses of capital, including investment in high-return formats and potential shareholder returns, as leverage continues to decline.

“We feel good about the H2,” Platt said, citing the combination of the World Cup summer and the growing contribution from the new pub formats. “As a result, we’re very much continuing our guidance, and we’re on track for expectations for the year.”

About Marston's LON: MARS

Marston's PLC operates managed, franchised, tenanted, partnership, and leased pubs in the United Kingdom. It is also involved in the property management; telecommunications; and insurance businesses. The company was formerly known as The Wolverhampton & Dudley Breweries PLC and changed its name to Marston's PLC in January 2007. The company was founded in 1834 and is based in Wolverhampton, the United Kingdom.

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