Brewer and pub operator Marston’s today warned that its running costs will increase by around £12m over the next year, as the price of food, energy and brewing materials continues to escalate.

The warning came as the Pitcher & Piano owner unveiled a 2% rise in turnover for the year to 4 October during what it described as “very testing market conditions”.

In Marston's Inns and Taverns, the company’s managed pub division, like-for-like sales were 0.6% down (2007: 4.6% growth).

The company revealed that food sales now account for 36% of total retail sales and added that its value-for-money operating formats in particular had continued to perform strongly.

In Marston's Pub Company, the tenanted and leased pub division, like-for-like profit was 1.7% below last year including a decline of around 3% in the second half of the year.

The level of support offered to tenants and lessees of the division - including rent alleviations, discounts and assistance in reducing costs – increased to approximately £2m.

To alleviate the expected rise in costs, Marston’s hopes to negotiate better purchasing terms and implement efficiency measures, including an annual cost reduction of £4m following a reorganisation of head office support functions.

Looking ahead, Ralph Findlay, Marston’s chief executive, said: “Although we remain cautious about the immediate trading outlook we believe we are relatively well positioned for the current environment, with a focus on value for money in our managed pubs; a tenanted and leased business operated with a view to sustainability and shared risk and reward; and a great range of premium cask ales”.

Mark Brumby, leisure analyst at Blue Oar Securities, said: “Marston’s is resilient and has a robust business model. Food sales are pushing ahead and, though there is a margin cost in this mix-change, food is the future.

“The group’s managed houses are outperforming the market and its tenants are not over-rented and are getting the help that they need.”

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By Daniel Thomas

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