Good morning, everybody. Thank you for joining us. Welcome to the Marston's preliminary results for the financial year ending September 2024. My name is Justin Platt, CEO, and with me I have Hayleigh Lupino, our CFO. We will take you through our results today, and we will go through it in the following running order.
I'll start with some quick headlines. Hayleigh will then talk to the financial results, and then I will come back and give some color on our operational progress before wrapping up and taking any questions that you might have.
2024 has been a really seminal year for our company. The sale of our stake in CMBC has really enabled us to focus on our sweet spot and build a future as a simplified and a focused hospitality business. And our results show that we're already making big strides and good progress towards that future.
The trading's been strong at 4.8% like-for-like revenue. We're ahead of the market, and we've done that while expanding our margins, as you know, a key goal for us. Terrific progress at 190 basis points versus the prior year. And the combination of those things has enabled us to step up our cash flow delivery and return GBP 44 million of free cash flow.
So really good financial performance, but at the same time as delivering those financials, that's gone hand in hand with us giving our guests a great time in our pubs. Record delivery for us in guest satisfaction. So that reputation score of 800 is a record for us. We've never delivered a score that high before. Really, really pleasing progress.
So good financial performance and good operational performance. As we said at our Capital Markets Day, we're now clearly focused on five key value drivers that will ensure delivery and sustained growth like that into the future. Overall, a strong year of delivery and a strong year of laying foundations for a successful future. With that, I'll hand over to Hayleigh to take you through the financial results.
Thank you, Justin. So this morning I'm going to take you through the financial performance for FY 2024. So if we start with the top line and we look at like-for-like sales versus FY 2023, what you can see is a consistent outperformance of the market. And on the right-hand chart, it shows you quarter by quarter how that's flown through the year. But overall, a 4.8% year-on-year like-for-like sales growth versus a market of 3.6%. That has then translated into strong earnings and operating profit growth with significant margin improvement.
So overall revenue is up 3%, versus FY 2023, to GBP 899 million, including the impact of disposals; EBITDA growth of 13%, up to GBP 193 million; a nd as Justin pointed out, EBITDA margin growth of 190 basis points to 21.4%. That has led to a 17.9% increase in operating profit; and pub operating profit margin of 16.4%, which is 210 basis points improvement. I'll come on to how we've been able to build that throughout the year on the next slide.
We have interest costs of GBP 105 million, which includes us amending our bank facility, and that has dropped through to GBP 42 million profit before tax, which is a 65% profit growth in the year, and also a 49% growth in earnings per share to GBP 0.052.
I said, on the next slide I would explain the operating margin and the improvement that we've made. So 14.3% in FY 2023, 1.2% improvement through our energy and property initiatives. So first of all, repairs is 0.2 of that. That is really generated by what we set out at the interim results around efficiencies to do with proactive and reactive maintenance. The remainder of that is through energy, with 80% of that being through rate but 20% coming through 8% less usage year-on-year.
Then we move on to our business simplification. We continue to build on menus that are focused on the guests, therefore enabling us to make sure that we deliver improved profitability. That's 0.8%. Our pub support center restructure last year has dropped through to this as a 0.4% for the full year impact. And then our focus on pub labor productivity means we've delivered 0.1% of margin.
Throughout the year, we've also invested in demand-driving marketing to drive people into pubs, which means we ended the year at 16.4%, which is a 210 basis points improvement and which we said we would do over a two- to- three-year period, and we've done that in year one. That has then dropped through to GBP 44 million of recurring free cash flow. And what you can see on this slide is that GBP 194 million of operating cash flow, significant improvement on the previous year.
I've already spoken about interest costs. With regards to CapEx, we've spent GBP 46 million in the year. That's all been on maintenance. There's been not much transformational CapEx this year. We've focused on developing the strategy. But as set out at the CMD, we expect to start to move CapEx towards 7%-8% of revenue. And in FY 2025, we expect to spend around GBP 60 million as we move through.
That has led to a GBP 44 million recurring free cash flow. That also has the benefit of the timing of year-end, where we've had some weekly payroll and the payments for VAT flow after year-end. So the underlying free cash flow is GBP 30 million+ within the year.
The overall cash flow has been helped by disposals, GBP 47 million of pubs and the GBP 206 million we received from the disposal of CMBC, leading to a net cash inflow of GBP 310 million. On the next slide, you can see that that has then flown all the way through to our debt, with net debt excluding IFRS 16 down to GBP 884 million, ahead of our schedule of 2026 and a 27% reduction since 2022.
Our debt position is predominantly long-dated, with a look at the securitization out to 2035, and our property leasing 30- 40 years, l ess reliance on a medium-term bank facility. Overall, a strong financing position underpinned by GBP 2.1 billion in assets, which is 83% freehold. I'll come on to the property valuation in a couple of slides.
In terms of financing, the sale of CMBC has enabled us to rightsize an RCF. We have a GBP 200 million facility that was extended and amended during the year out to July 2026, but there is an option to extend that to July 2027. Previously, we had GBP 120 million of that hedged. With the new facility, we now have GBP 60 million, and that's fixed at 3.45% till 2029.
Our long-dated securitization of GBP 560 million out to 2035. We do have the GBP 120 million securitization liquidity facility, but that has not been utilized this year, and then the long-term leases, which we expect to last 30- 40 years, are capped and collared at 1%-4%, so although we have different pieces of debt, we have 100% of our medium- to long-term financing is hedged.
And then with regards to our property, we disposed off GBP 47 million disposals in the year, and since the year-end, we have completed GBP 4 million. The high-quality 83% freehold pub estate was revalued in the summer. That's valued at GBP 2.1 billion, and within the property uplift, there's been GBP 57 million.
Net asset value per share of GBP 1.03, an increase on FY 2023, and that is really underpinned by the performance of the business leading to higher property valuations and also, you know, the debt reduction that has been achieved during the year.
With regards to pensions, it's broadly stayed at around GBP 13 million year-on-year, but importantly, we highlighted previously our results. We have ceased the GBP 6 million contribution towards the deficit from the end of 2024, so overall, we have high-quality assets, which is a predominantly freehold estate and with stable valuations.
And as we look out further into 2025 and beyond, clearly at the CMD, we highlighted some targets, and also there's been an Autumn Budget since then. What we expect is, through the execution of our operating model, we will offset the impact of the budget measures. We are today reiterating our commitment to our stated Capital Markets Day targets, including the 200-300 basis points of EBITDA margin.
The chart at the bottom of the slide shows that we did expect GBP 4 million of increased wage inflation, around 7% for National Minimum Wage, and other inflation. With the Autumn Budget and the change to NI thresholds and the slightly higher- than- anticipated National Living Wage, there is an additional employment cost in FY 2025 of GBP 4.6 million.
We expect to offset this through productivity, through energy. We have locked in electricity for 2025. We have also got gas locked in till March 2025, so pretty certain on those costs. And then other efficiencies alongside our focus on to drive spend per guest, we still expect some EBITDA margin expansion in 2025.
And as part of our long-term targets, then we also see an opportunity for significant organic NAV increase over that time. So the opportunity for debt- to- equity transfer, what we know is that over the next three years, we'll pay GBP 139 million of the securitization amortization, which will also add around GBP 0.22 per share. And then if we continue to grow ahead of the market or in line with the market on sales and our EBITDA margin, that should drop through to property valuations, which is around GBP 0.23 per share.
And then longer term, as we look to potentially refinance, although we don't need to, there could be some further unlock of value in the future. So this gives you an illustration of where we believe we can add value based on the strategy that was set out at the CMD.
So in summary, we have had a good start to FY 2025 with like-for-like sales for the first six weeks at 3.9%. Our Christmas bookings are tracking ahead of last year with high levels of reservations. And then with regards to costs and margin, the autumn budget did place additional pressure on our costs, but we do expect to offset that. A nd we are committed to our 200 to 300 EBITDA margin improvement over the medium term.
Our cash flow in the year was supported by the CMBC sale, but importantly, we generated GBP 44 million of underlying free cash flow, and we are targeting that GBP 50 million in the near term. With regards to financing, we highlighted back in July that the sale of CMBC would reduce interest costs versus our expectations of around GBP 18 million. A nd also, we've been able to rightsize that short-term finance facility with the banks out to July 2026, so overall, a good FY 2024 for the business. I'll now hand over back to Justin so he can share with you some operational highlights.
Thank you, Hayleigh. So as Hayleigh says, I'll now give you some brief highlights from our year operationally. Before I do that, though, I did just want to recap a little bit on what we said at the Capital Markets Day six or so weeks ago.
And the first and very important thing to say is we sit in a very lucrative market and a market that has got significant opportunity. Pubs are right at the heart of U.K. socializing. And hence, that's why you see a market in excess of GBP 28 billion in value today and a market that's projected to grow at a sustained rate of 3% a year. So a big market and a growing market. And within that, local pubs are thriving.
So as you can see on the right-hand side of the chart, in the last 12 months, the local pubs market segment has been growing at 4%. So a good market to be in for a number of reasons and one that we as Marston's are inherently well placed to capitalize on. We've got a locally based estate. 90% of our pubs are local pubs. They are based in the heart of British communities. And we also have a well-balanced management model. So the ability to flexibly adapt to changes in the wider world is in our gift as we manage the different management models that we have in our grasp. So real value opportunity in a good and growing market.
And it's against that opportunity, on the next slide, that you see our approach to delivering on that position. We very much set out to have a high-margin business, to have a highly cash-generative business, and as I say, a local pub company that is based on a differentiated portfolio that seeks to meet the needs of a range of consumer segments.
That's the core strategy, and that's what will endure as we seek to capitalize on the pub market, b ut we will do that by executing against five key value drivers. And these five drivers will underpin all of our activity in the coming years.
So we will seek to execute and have a market-leading operating model, the balance between revenue, cost, and guest satisfaction. Getting that balance right is key and is value driver number one. In addition to that, we will use CapEx to create differentiated pub formats against a range of consumer segments. Thirdly, we will use digital to transform our business and support what we do with our people to drive better service and better efficiency of business operation.
Our fourth value driver is about expanding those managed and partnership management models that I talked about a moment ago to help support our business, and finally, the fifth value driver that will support us is in leveraging those synergies that we create almost in value drivers one to four in targeted acquisitions.
So five key value drivers to deliver on that strategy, and we will consistently manage our success against those with the key metrics that you can see on the right, so we'll seek to drive like-for-like revenue growth ahead of the market. We'll want EBITDA margin expansion on a sustained basis, so 200 to 300 basis points over the medium term. And any investment CapEx that we do go forward with, we'll always seek to deliver ROICs in excess of 30%.
So a big focus on growth and focus on those five value drivers to get us after that growth. And the good news, as you'll see on the next chart, is that some signs of early success in executing against this strategy in 2024.
So I'll look on the next three slides on value driver one, the market-leading operating model. And you'll remember from the Capital Markets Day very clear, this is about balancing the delivery of revenue, cost management, and guest satisfaction.
So this first chart talks specifically from a revenue perspective. You can see from the graph on the left we've consistently delivered revenue growth ahead of the market in 2024, and we've started very well in financial year 2025 on that same path. The key to success in driving revenue is giving consumers a reason to visit your pubs, a constant stream of news that compels the guests to want to come and see us, to want to come and socialize with us.
Cheers to Heroes was our first event of the new financial year this year. That is a partnership with the British Legion. It was a month of events in our pubs to celebrate our heroes. We executed on that really, really well. It's just a good example of a demand-driving event that we'll use to drive footfall into our pubs. Good news in terms of revenue.
On the next slide, in terms of cost, Hayleigh talked earlier on the progress we've made on driving our margin, made really, really good progress this year on margin. There's a number of initiatives that we've focused on a nd will continue to focus on in our goal and our programs to drive a lean and a flexible cost model.
From a labor point of view, there's a lot of work going on with scheduling and rosters using AI and a whole raft of technology to ensure we crucially have the right staff at the right time to serve our guests. From a food point of view, continued efforts to simplify our offer.
What we do here is we listen very carefully to our consumer insight, and we adapt our food and drink offers accordingly. Some of that is about adding menu items, but crucially, it's about learning the areas where we can reduce complexity and take menu items out. A, you improve the guest offer, but b, you drive efficiency in your supply chain. Really good progress on food and drink.
Hayleigh talked earlier about the work we've done on energy and property. It's a core competency in the business now to drive energy efficiency. I'm really pleased to show that in, 2024, we've driven an 8% usage efficiency in our use of energy.
Great progress on revenue, really, really good progress on cost. As I said earlier, you'll see on the next slide that hasn't been at the cost of reputation. Absolutely delighted that in the context of driving that efficiency, we've still delivered great satisfaction for our guests.
The feedback in our pubs continues to be very positive. This is demonstrated by these are record reputation scores for us at 800. We've never scored that high before. And a real testament to our pub teams, day in, day out, delivering really engaging service, being obsessed about meeting the needs of our guests all across the estate, all across the country. Really, really good performance.
And of course, this is the key indicator of revenue growth in the future, is if you give guests a good time, guess what, t hey'll come back. So will continue to be a key focus for us is driving that satisfaction. That balance of the satisfaction for guests, your cost efficiency, and your revenue is what executing a market-leading operating model is. And yeah, good progress in 2024, but still more for us to go for in future years of the plan.
It's that really having outlined the drivers for the future and the strategy. It's that really that progress against that at the early stages that leaves us feeling very encouraged for the year ahead. We've got a big and a sustained events program planned throughout the year. As I say, giving guests real reasons to come and spend their time with us, to come and socialize with us.
In quarter one, it was Cheers to Heroes. A nd it'll soon be Christmas, as you would expect. We are now very much engaged in the run-up to Christmas. And through quarter two to quarter four, you'll see a constant stream of news encouraging people to come and spend their time with us. But on the right-hand side of the chart, remember the other value drivers within the strategy. A key one was about the launch of new formats.
And you'll see in 2025 our key focus here is on launches of the two-room pub. This is a pub that is designed to drive appeal with both family diners and pub regulars. It's a format that we've piloted quite extensively. And in all our pilot launches, we've been very successful in driving incremental demand for those locations. So a big focus for our format launches this year will be the two-room, and we've got high hopes that, alongside the events, that will augment our revenue delivery and set us up for a very strong and a very positive 2025.
So as I summarize that on one page, a very strong and a very important year for Marston's, strong financial and operational performance, good early progress against our value drivers. And that's what allows us to confidently reaffirm the targets that we set at the Capital Markets Day. And in turn, as a growing company in a growing market, that will ensure that we really can be reliable deliverers of recurring free cash flow. And with that, I can hand over for questions. Thank you.
Ladies and gentlemen, if you would like to ask a question on today's call, please signal by pressing star one on your telephone keypad. Again, that is star one for your questions today. And our first question comes from Douglas Jack of Peel Hunt. Please go ahead.
Yeah, good morning. Thanks very much. So just a quick one. I mean, looking at slide 12, which is very encouraging, the offsetting the budget slide, I mean, you're really not looking to do an awful lot on price, it seems, because the component, which is revenue growth initiatives, is quite small compared to the minimum wage impact bar. Is it fair to conclude within that then that you're not really looking to do an awful lot of price in the year ahead to offset that? That was the first question.
Second one was about disposals and how much more do you think you might sell during 2025. And the third one is your leverage is now down to the lowest level since 2006. Is the plan to sort of continue on that trajectory? O r how soon do you think you might be tempted to become acquisitive if the right opportunity arises? Thank you.
Thanks, Doug. I'll take the first couple, and then Hayleigh will come to the third one. In terms of our revenue and EBITDA drivers for the year, you're right. There will be a mix of, if you go back to our operating model triangle, there will be a mix of revenue initiatives and cost initiatives. Productivity is very important, as you can see from that chart, and we will continue with that.
And while I don't see headline price as the key tactic, as I talked about at the Capital Markets Day, driving revenue through, a, getting more people in, but b , increasing revenue per guest through a whole raft of things is certainly the way we see it. So I think your assumption is fair in terms of our overall approach.
I think, on the second one, on disposals, as you can see, this is a growth plan. It's not a selling plan. So any pub company, there's always some of your businesses that you consider, but I would say that is not in our line of sight at the moment. Disposals are not part of this plan and not a means of us delivering on the cash flow goals that we've got.
On leverage, Doug, clearly you've obviously heard at the Capital Markets Day that sort of growth is number one priority. Number two is to continue to delever, and we expect to be about 4x next 18 months to two years. And value driver number five is around acquisitions. Clearly, you can never time those acquisitions. So we would always look in the round if there was an appropriate acquisition that supported the four value drivers that we've got previous to that.
And we now take our next question, which comes from Fintan Ryan of Goodbody. Please go ahead.
Thank you. Good morning, Justin. Good morning, Hayleigh. Fintan Ryan from Goodbody here. Just one major main question for me, please. Obviously, in terms of your free cash generation for FY 2025, I appreciate your midterm ambition is to get that over GBP 50 million [by 2024 to 2026], but I guess as CapEx spend goes up, would you expect to be able to deliver that free cash flow above GBP 50 million for FY 2025?
When we set that target of GBP 50 million, Fintan, w e said that was the near term, which was one- two years. Clearly, yes, there is an improvement in CapEx, but that's offset by interest, saving in interest, as well.
Okay.
Thank you. And as a reminder, ladies and gentlemen, to ask a question today, please signal by pressing star one. That is star one for your questions. And we pause for a brief moment. And we now have a question from Anna Barnfather from Panmure Liberum. Please go ahead.
Thanks very much. Looking sort of longer term out and your securitization, I know that sort of costs of early redemptions are pretty punitive, and associated costs, but it is something I think you look at from time to time. So can you give us a sort of view, I guess, on where you think the costs are or what conditions interest rates could be to sort of loosen up the penalties of refinancing or paying down some of that debt faster, please?
I think, Anna, it is a balancing act for all of these. One of the compromises clearly is interest rates have gone up. The value of that swap has come down over time. I think previously it was up at GBP 250 million, so it's now a lot lower than that. Overall, interest rates going up means that any cost of new finance is a little bit more expensive.
We are constantly reviewing it in line with strategy. At the moment, we've set out that we can deliver the strategy that's set out at the Capital Markets Day, but we will keep an eye on the sort of markets as to what's an appropriate instrument and when it's appropriate to refinance. I guess that's all we can sort of say as it is today. We'r e focused on delivering the strategy that was set out.
Okay. Thanks very much.
Thank you. A nd as a final reminder, that is star one for your questions. We will pause for a further brief moment. A nd we received a follow-up question from Fintan Ryan. Please go ahead.
Thank you. Just one small question for me. I think more in response to some media articles we've been seeing recently about your ex- beer business, Carlsberg Marston's, appear to be pulling back on some of their cask ale brands, and particularly within the on-trade. I'm wondering. D oes this change for you anything with relation to your relationship with your ex-JV and with the Carlsberg company? And could you consider some alternative [audio distortion], particularly within that cask ale segment?
Yeah, thanks, Fintan. Could you just go on mute? Thanks. So obviously, we exited CMBC in the middle of the year, so [audio distortion] weren't party to those decisions. One of the good things about our arrangement when we did exit was we continued with our partnership agreements. And what that allows us to do is keep a really strong relationship with CMBC and the distribution contracts we have, b ut we do also have freedom to work with the other big [vehicles] , which we do in addition. So we have the flexibility across our pubs to consider a range of different cask and lager brands.
Thank you.
Thank you. And as there appears to be no further questions at this time, I'd like to hand the call back over to you, Justin, for any additional or closing remarks.
Just to say thanks, everybody, for joining us. Really appreciate you taking the time. Best wishes to everybody for the festive season. And there's still a few slots available if you want to book a lunch in a Marston's pub. Thank you very much.