MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 ## Pubs to be proud of ### MARSTON’S PLC ### ANNUAL REPORT AND ACCOUNTS 2022 ## Pubs to be proud of ### FINANCIAL HIGHLIGHTS ## Marston’s is a leading pub operator; ## our pubs are at the heart of the Revenue Net cash inflow ## £799.6m £26.2m ## communities they serve. 2021: £401.7m* 2021: £118 .1m | STRATEGIC REPORT | FINANCIAL STATEMENTS | | | | --- | --- | --- | --- | | | | Underlying Profit/(loss) before tax | Underlying Earnings/(loss) per share | | Our purpose 1 | Independent Auditor’s report to the | | | members of Marston’s PLC 99 At a glance 2 ## £27.7m 4.3p Group income statement 108 Chair’s statement 3 * * 2021: £(101.3)m 2021: (13.6)p Group statement of CEO’s statement 4 comprehensiveincome 110 Market dynamics 6 Group cash flow statement 111 Profit/(loss) before tax Earnings/(loss) per share Our business model 7 Group balance sheet 112 ## Our strategy 8 £163.4m 21.7p Group statement of changes in equity 114 Group operational and financial review 17 2021: £(171.1)m* 2021: (20.3)p* Notes to the Group accounts 116 Section 172(1) statement 20 * From continuing operations. Company balance sheet 155 Stakeholder engagement 21 Company statement of Responsible business 24 changes in equity 156 Non-financial information statement 41 Notes to the Company accounts 157 Risk and risk management 43 WE HAVE PUBLISHED OURFIRST TCFD REPORT ### ADDITIONAL INFORMATION ### GOVERNANCE Alternative performance measures 167 Chair’s introduction 56 Information for shareholders 171 The Strategic Report, outlined from the inside front cover to page 55 incorporates: Our purpose, At a glance, Chair’s Board of Directors 58 statement, CEO’s, Market dynamics, Our business model, Our strategy, Our key performance indicators, Strategy in Glossary 173 action, Group operational and financial review, Section 172(1) statement, Stakeholder engagement, Responsible business, Non-financial information statement and Risk and risk management. Corporate Governance report 60 By order of the Board Directors’ Remuneration report 72 ANDREW ANDREA CHIEF EXECUTIVE OFFICER STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### OUR PURPOSE ## Our purpose is to bring Pubs are where we go to socialise, celebrate, share an experience, or simply enjoy a drink or bite to eat, with our friends, our family, or our colleagues. They are seen ## people together to create as an affordable treat and our high-quality pubs are at the heart of many local communities, offering a warm welcome. A place to enjoy good company. Marston’s is a people-powered business and our behaviours and strategic ## happy, memorable, objectives are core to how we achieve our purpose: ## meaningful experiences. ## Pubs to be proud of ### WE ARE GUEST WE RAISE WE WILL ### OBSESSED THE BAR GROW We always put our guests first, We’re committed to each We challenge ourselves, aiming to delight them every other, the business and being and each other, to ensure time they’re in our pubs. the best version ofourselves. we’re always improving and moving forward. READ MORE ON PAGE 11 READ MORE ON PAGE 14 READ MORE ON PAGE 16 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 1 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### AT A GLANCE ## A focused pub operator C Marston’s has around 12,000 employees and a diverse estate of over 1,400 pubsand bars which allows us to offer Pubs and bars No. of Community pubs something for every guest, as well as ## contributing to each of the communities 1,468 1,057 C R S where we operate. We are a focused puboperator, with a culture that places R S 15 1 5 C R S guests at the heart of everything we do. ### Scotland No. of Revere pubs No. of Signature pubs Our vision is ‘Pubs to be proud of’. 263 15 17 Thisembodies our DNA of being a ## 44 101 8 T&L focusedpub operator, whilst consistently delivering high levelsof guest satisfaction T&L and standards through our great pub teams. 76 34 ### No. of Tenanted Electric vehicle North of England We are guest obsessed: &Leased pubs chargers • This year we have simplified our pub estate. Our menus have been streamlined ## 266 123 too and some of our pubs have been C R S repositioned to one of our three formats. We will grow: • We have invested in our guest journey and • To deliver our £1 billion sales target, we insight, with improved systems and 457 6 37 ### areinvesting in key areas of our estate, Midlands processes, supporting guest-led decisions. evolving our franchise-style model through T&L We raise the bar: innovative offers and creating a ‘Never | | | | C | R | S | | | | --- | --- | --- | --- | --- | --- | --- | --- | | • Continuous improvement has been | | full, fancy another’ sales culture. | | | | | | | | delivered by investing in our people, | | | | | 125 | 44 | ‘Doing more to be proud of’ improving our reward and recognition 157 1 16 ### • Our ESG initiative is linked to our corporate Wales programmes and investing in employee vision. Targets have been set for Net Zero engagement; one of our critical T&L and food waste and our social purpose C R S successfactors. agenda has been a focus for us this year. 45 11 165 21 26 ### South of England T&L 2620 2 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CHAIR'S STATEMENT # A year of change Last year was one of significant change. In December, the emergence of the Omicron variant brought much disruption to the sector and, this was followed by war in Ukraine triggering global economic disruption. We also recognise the tragic human cost of war. We have seen several changes to the body politic and economic policies. Finally, as we closed out our financial year, we observed the passing of Queen Elizabeth II, who we will remember fondly. ![img-0.jpeg](img-0.jpeg) WILLIAM RUCKER CHAIR ## Our vision strategy and goals Following the sale of the brewing business in October 2020, Manton's became a focused pub operator. Andrew Andrea became CEO in October 2021 and we have seen transformational change in his first year. In November 2021, we set out our vision 'Pubs to be proud of'. This is a simple vision underpinned by a clear strategy and measurable goals focused on our guests, standards, and employee engagement. These underpin and support the development of our high-quality pubs, creating a long-term sustainable business. At the same time as Andrew's appointment, we formed a new Executive Committee and a 28-strong Leadership Group. The Board was pleased to see that the Company has both experienced and capable senior leaders, and we look forward to continuing to support the development of a diverse pipeline with the skills and knowledge to support growth. Our corporate goals remain clear and focused: we aspire to create a growing pub business with sales in excess of £1 billion and borrowings below £1 billion. Whilst the timing of this has been temporarily impacted by inflationary pressures, these targets remain core to the Company's success in the long-term and generating value for shareholders and, as such, remain unchanged. ## Trading and outlook Trading was significantly impacted by the emergence of the Omicron variant in December 2021 and the beginning of 2022. However, despite this, total retail sales for the year were 99% of financial year 2019. The SA Brain portfolio of pubs, acquired in the last financial year, is performing well with sales in line with our initial expectations, which is particularly encouraging in light of the current economic challenges. Margins have naturally been under pressure because of widespread inflation, particularly energy, food, and labour costs. However, we have been able to offset much of this by implementing efficiencies through our supply chain and price increases, with minimal impact on trading. I am also pleased to report that, despite the wider macro uncertainties, the estate revaluation this year shows an increase in value of £93.4 million. This marked increase reflects the strength of our business and the ongoing consumer support for the pub in a post-pandemic environment. Our cash flow for the year was also encouraging, with a net cash inflow of £26.2 million. We have also maintained and significantly expanded our maintenance capital and conversion programmes. The majority of our financing is long dated with hedging in place to protect against interest and inflation volatility. As a result of the impact of Omicron in the first half of the year, we are in discussions with our lending banks and private placement provider to agree further banking covenant amendments before the next covenant test of 31 December 2022, which we do not expect to pass, due to the continued recovery from COVID-19. Whilst there is no certainty that such amendments will be granted, given our experiences to date, we are confident of securing these where necessary. This has been disclosed as a material uncertainty in the financial statements. ## Sustainability We remain committed to driving our ESG agenda through the 'Doing more to be proud of' initiative, including a target to achieve N-Zero by 2030 for Scope 1 and 2 emissions on by 2040 for Scope 3. I was also proud to see that our team were awarded a Special Achievement Award at the Drinks Sustainability Awards recognising our longstanding commitment to sustainability. ## Shareholder returns Given the significant disruption in the financial year and the potential for continuing uncertainty, the Board has decided that it would not be appropriate to propose a dividend in respect of financial year 2022. Our immediate priority is to reduce debt, but the Board remains cognisant of the importance of dividends to many of our shareholders, and we continue to review our dividend policy. ## Looking to the future Looking forward, whilst we are aware of the strong headwinds, history demonstrates that pubs are resilient. They are seen as an affordable treat and our high-quality pubs are at the heart of many communities nationwide and seen as an important place to meet and socialise, whilst enjoying quality food and drink. We remain well-placed to meet the challenges ahead by executing our strategy, which in turn supports the long-term success of the Company and generates value for all stakeholders. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CEO’S STATEMENT ## Delivering on our purpose | 2022 has been a year of two halves. | With the impact of COVID-19 restrictions | Trading | Property and net assets | | --- | --- | --- | --- | | Thefirst half year results were impacted | hopefully behind us and despite the | | | | | | Revenue increased by 99% to £799.6 million | The Group has moved to annual external | | bytrading restrictions and consumer | well-documented cost inflation, which all | | | | | | (2021: £401.7 million from continuing | valuations of its properties and all pubs | businesses are facing currently, the Group will confidence as a consequence of the operations), principally reflecting recovery willbeinspected on a rotational basis. Each benefit from an estate that is balanced disruption caused by the Omicron variant, from a period severely impacted by COVID-19 year, valuation will be based on a physical across formats and locations, with well- affecting December 2021 and the critical and the significant restrictions to pub trading inspection of approximately one third of the invested pubs, and is set for future sustainable Christmas trading period through to the during the prioryear. estate with the remainder subject to a like-for-like growth and shareholder value end of January 2022. During the second desktop valuation. creation over the medium to long term. As expected, given the significant impact half, we were encouraged that we traded | | | ofthe Omicron variant during H1 and the | The carrying value of the estate is now | | --- | --- | --- | --- | | well and consumer demand for our pubs | In 2021 we launched our new vision ‘Pubs to | | | | | | important 2021 festive season, like-for-like retail | £2.1billion (2021: £2.0 billion); as a result of the | | remained robust as more normalised | be proud of’ with a purpose ‘to bring people | | | | | | sales for the year as a whole were 1% below | valuation and leasehold impairment review | | trading conditions resumed. | together, to create happy, memorable, | | | | | | 2019 levels, the last pre-pandemic trading | there is an effective freehold impairment | meaningful experiences’, which embodies year. However, like-for-like retail sales for the reversal of £88.4 million and a leasehold our cultural DNA of being a pub operator at 10weeks to 1 October 2022 were 3% up impairment reversal of £5.0 million, giving our core, whilst focusing on consistently compared to 2019 and 4% up compared to a£93.4 million increase in net book value. delivering high levels of guest satisfaction 2021, showing encouraging recovery and the and standards through our great pub teams. During the period, net asset value increased positive impact of our strategy. | The performance supports the progress we | | by £241.7 million to £648.1 million. This is | | --- | --- | --- | | are making against our strategy and the | Drink sales have outperformed food sales, | primarily due to the increase in the value ofour | | transformation which has been implemented | once again demonstrating the trading | estate and reduction in liabilities from interest | | across the business in FY2022. Our primary | resilience of our predominantly community | rate swaps. As a result of this, net assetvalue | | corporate goals remain: reaching two | pub estate. We continue to have confidence | per share has increased to £1.02(2021: £0.64). | | £1billion financial targets over time, namely | that our pub strategy is beginning to deliver | | | the achievement of sales of £1 billion and | positive momentum, evidenced by the trading | Debt and financing | | reducing the Group’s debt, excluding | performance. Our strategy is centered upon | | The vast majority of our borrowing is IFRS16lease liabilities, to below £1 billion. delivering affordable pub experiences for our long-dated and asset-backed. 90% of our Wecontinue to make progress on both of guests in a quality environment both inside borrowings are hedged and therefore not at these goals. and out in our well invested pub gardens and risk of any changes in interest rate movements outdoor trading areas. that may occur during the year. Further detail Underlying operating profit excluding is set out in the Group Operational and income from associates was £115.4 million Financial Review on page 17. (2021: £5.7 million) with a margin of 14.4% Net debt, excluding IFRS 16 lease liabilities, ANDREW ANDREA (2021: 1.4%); H1 margin was 10.8% and H2 was £1,216 million, a reduction of £16 million CHIEF EXECUTIVE OFFICER margin was 17.6%. Underlying operating from last year (2021: £1,232 million). Total net profit, including income from associates, debt of £1,594 million (2021: £1,604 million) was£118.7 million (2021: loss of £(8.8) million). includes IFRS 16 lease liabilities of £378 million (2021: £372 million). 4 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CEO’S STATEMENT CONTINUED ## Delivering on our purpose Carlsberg Marston’s Brewing Current trading and outlook Food and drink: c.60% of food is contracted Looking ahead, whilst the short-term outlook is until FY2023 or beyond. For drinks, 74% of the of course uncertain, we remain confident in Company (CMBC) Trading since the year end remains | | | cost is contracted beyond FY2023 and the | the future prospects of the Group. What is | | --- | --- | --- | --- | | The pandemic and the macroeconomic | encouraging. Like-for-like sales in our | | | | | | annual price increases for these contracts | clear is that people want – and are continuing | | environment have had an impact on CMBC’s | managed and franchised pubs are up 6.8% vs | | | | | | are in line with our previous guidance. | – to visit our predominantly community pubs. | | trading results in financial year 2022. The | the same period last year. October earnings | | | Our customer insight and experience were in line with our expectations. Bookings for Labour: following the Autumn Statement income from CMBC of £3.3 million (2021: loss concludes that people still want – and are Christmas Day and Christmas Fayre are andthe higher than initially anticipated of £(14.5) million) reflects the Group’s share of keen – to socialise, with the pub historically encouraging and are building in momentum. increases to NLW/NMW, effective April 2023, the statutory profit after tax generated by being the place to fulfil that ‘affordable Total bookings for the Christmas period are we estimate the impact to be an additional CMBC. Whilst CMBC’s results show a recovery socialising’ occasion, prioritising experience higher than in 2019 and in line with our plans, c.£2million of higher costs in FY2023. As part from last year, they also reflect the impact of and leisure expenditure over bigger ticket albeit walk-in trade typically accounts for a of our pricing review, we will seek to mitigate the Omicron variant during the year; H1 saw spend. The level of guest demand we are significant proportion of overall sales over the the majority of this cost. a loss of £(2.0) million. experiencing is encouraging and underpins Christmas trading period. Energy: the Group’s gas price is fixed until our confidence that we have the right Dividends from associates of £19.4 million For the first two England World Cup games, theend of March 2025 with no additional strategy in place and that it is delivering were received (2021: £nil), primarily resulting like-for-like drink sales on those days were incremental spend anticipated. The Group’s positive progress on our clearly stated from one-off working capital movements. c.+50% compared to 2021. electricity is hedged for H1 of FY2023, covering strategic goals. Over and above this, the Weremain confident we will receive regular the six-month period from October 2022 to World Cup and the first Christmas period future dividends from CMBC when there is We remain cognisant of the current March 2023. The Government’s six-month without restrictions in three years present areturn to a more normalised market. macroeconomic environment with the energy price cap for businesses is helpful excellent trading opportunities for cost-of-living crisis, the impact of the conflict ESG – ‘Doing more to be proud of’ andfurther protects our H1 energy spend. Marston’spubs. in Ukraine and the resulting challenges this Regarding H2, we await the review of the brings in respect of cost inflation and the We remain committed to driving our ESG price cap, expected by 31 December 2022, potential impact on disposable income, as agenda under ‘Doing more to be proud of’, albeit at this stage the guidance we have well as potential supply issues. However, pubs with a target to achieve Net Zero by 2030 provided on energy costs for the Group’s have demonstrated their resilience time and forScope 1 and 2 emissions and by 2040 for financial year as a whole remains the same. time again and, to date, there is little in our Scope 3, and reduction in our food waste Inkeeping with our commitment to our ESG trading performance to suggest that there by50% by 2030. We are also focusing on strategy, we continue to focus on making has been a change to consumer behaviour; oursocial impact, including exploring efforts to mitigate energy costs wherever our guests still want to go out and have an apartnership with the Trussell Trust and possible, such as adopting further energy affordable treat in a Marston’s pub. | providing employment opportunities for | | efficient or saving schemes. | | --- | --- | --- | | vulnerable groups under our Latitude | Similar to others in the hospitality business, our | | | programme. Our commitment to standards | major cost lines within the business are food, | | | and good governance remains with EHO | drink, labour and energy. We continue with a | | | scores of 5* being a KPI. | relentless focus on managing costs to mitigate | | the inflationary impact on the business. We This year, we have also published our first are working hard to mitigate as many of these TCFD report, detailing the impact of climate cost pressures as possible and we expect to change on our business. More information on offset some of these higher levels of inflation our initiatives and TCFD report will be through a combination of cost efficiencies available on our website. and pricing strategies. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 5 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### MARKET DYNAMICS ## Insight and trends | Despite the challenging macroeconomic | ` Lifestyle changes favour community | ` ‘Al fresco’ drinking and eating is | Order and pay at table systems are | | --- | --- | --- | --- | | environment, our focus has been to ensure | pubs versus town centres | heretostay | keyto driving garden sales and we | | we deliver great pub experiences to our | Emerging from the pandemic the shift | The demand to eat and drink outside | invested in technology during the | | guests, at an affordable price in a | to hybrid working has embedded itself, | has been increasing for many years, a | yearto improve both the guest and | | well-invested estate. History demonstrates | with office workers typically working | trend further bolstered post-pandemic. | operational journey. Encouraged by | | that pubs are resilient and are viewed as | 1–2days a week at home. In addition, | To maximise our opportunity we have | the2022 performance, we believe | | an affordable treat. | in the current climate, for pubs that | invested in outside space with c.85% of | ouroutdoor spaces can be enhanced | | | offer the right experience, guests will | our pubs having gardens and c.50 pubs | further by investing £4 million across | There are five key dynamics of the consider staying within their local having outdoor screens to show sport, theestate in 2023 on garden changing market which we believe we community rather than spending enhancing trading performance projectstodeliver an even are well equipped to benefit from: | | money to travel to a city or town | throughout the seasons. | betterguestexperience. | | --- | --- | --- | --- | | ` Our guests still want to socialise outside | centre. Over 90% of our pubs are in | | | | the home | suburban areas and are well placed | | | | The desire to socialise remains strong. | toexploit this trend. We are focused on | | | | Arecent CGA survey highlighted that | providing a ‘town centre’ experience | | | | going out to socialise was the number | inour suburban pubs, ranging from an | | | | one item of spend to protect in the | improved menu and a guest-led drinks | | | | current environment. | range to ensuring we provide the right | | | entertainment or occasion-led ### ` ‘Brand Pub’ is in strong demand experiences for the local community. The strategy we set out a year ago focused on creating ‘Pubs to be proud ### ` Experience replacing convenience of’ ensuring all of our pubs welcomed asreason to visit drinkers and diners equally. Our As referred to above, there is strong strategy remains unchanged. This demand to socialise outside the home, winter, our campaign will be aimed at but the focus and expectation of our welcoming our guests into Marston’s guests is driven by experience and warm and cosy pubs as the place to quality, rather than convenience or socialise at an affordable price, and price. We seek to be regarded as the enjoy the first winter World Cup. ‘best pub around here’ offering a great value, affordable treat but not at the lowest price. 6 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### OUR BUSINESS MODEL ## A people-powered business ### OUR RELATIONSHIPS WHAT WE DO THE VALUE WE CREATE ## ` ` ` Our business model relies on the strength of Responding to changing market dynamics, we’ve simplified our estate by categorising For our guests ourrelationships with our key stakeholders to our pubs into three core formats and conversion of the estate to one of these categories generate and maximise value in a responsible is ongoing. Our investment programme ensures that our pubs are maintained to the ## 731 and financially prudent manner for the highest of standards. long-term success of the Company. Reputation score The best people For our people Great pub teams, support teams and leaders all focused on delivering great guest experiences. ## 75% Happy guests Participation in our Peakon Delighting our guests on every occasion, so they visit employee engagement surveys our pubs time and time again. forthe fullyear Committed Pub Partners For our pub partners Working with entrepreneurs who believe in our purpose and strive to achieve our shared vision. ## 1,057 101 44 ## 64 Trusted suppliers Community pubs Signature pubs Revere pubs Pubs now on our innovative Long-term, mutually beneficial partnerships with our Pillaragreement suppliers, delivering success for all. ### HOW WE DO IT For our shareholders ## Supportive Government ` Our one team approach, focused on our clearly defined pub and corporate goals, NAV Engaging with, and working with, Government and other regulatory bodies ensures the best outcomes working better and smarter, to deliver our vision of ‘Pubs to be proud of’. for our guests and our business. ## £1.02 Engaged communities Investment in our core assets, We play an active role in our communities, improving and maintaining the generating a positive impact at a local level. highest standards ### A responsible business WE ARE GUEST WE RAISE WE WILL READ MORE HOW WE ENGAGE ### We’re committed to being a responsible and OBSESSED THE BAR GROW WITHOURSTAKEHOLDERS ON PAGE 21 sustainable business and doing the right thing: | Doing more to be proud of. | We always put our guests | We’re committed to each | We challenge ourselves, | | --- | --- | --- | --- | | | first, aiming to delight | other, the business and | and each other, to ensure | | | them every time they’re | being the best version | we’re always improving | | | inour pubs. | ofourselves. | and moving forward. | | | READ MORE ON PAGE 11 | READ MORE ON PAGE 14 | READ MORE ON PAGE 16 | MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 7 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### OUR STRATEGY ## A clear guest-focused pub strategy In 2021, we launched our vision: ‘Pubs to be proud of’. Our strategy is unchanged as we focus on achieving our clear pub and corporate goals which will ultimately promote the long-term success of the Company, generating value for shareholders. CORE PUB 1 2 3 4 GOALS | | | Loved by guests | | | Trusted | | | Great place towork | | | Sales culture | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | All of our pubs to have a | | All of our pubs to be 5* EHO | | | | Peakon engagement score of | | | ‘Never full, fancy another’ | | | Reputation score of 800or more | | | | FOOD HYGIENE RATING | | | | | 8 or more | | | | | | | | 0 1 2 3 4 | | 5 | | | | | | CORE CORPORATE 5 6 7 GOALS | | Better than the rest | | Responsible business | | | Back to a billion | | --- | --- | --- | --- | --- | --- | --- | | Consistent market outperformance | | Committed to being a responsible | | Achieving £1 billion sales and reducing | | | | | | | and sustainable business | | net debt below £1 billion | | STRATEGIC PRIORITIES | WE ARE GUEST OBSESSED | | | | WE RAISE THE BAR | | | | WE WILL GROW | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Start with guest experience | | | Operational excellence | | | High returning growth capex | | | | | | not convenience | | Peopleinvestment | Development of partnership agreements | | | | | | Focus on peak periods | | | ‘Make Great’ sessions | | Exploit M&A opportunities | | | | | READ MORE ON PAGE 11 | | | READ MORE ON PAGE 14 | | | READ MORE ON PAGE 16 | FINANCIAL STRATEGY DRIVING SHAREHOLDER VALUE FINANCIAL Grow earnings Reduced debt Increased returns OUTPUTS Progressive and sustainable dividend Debt: equity transfer Increased NAV 8 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### OUR STRATEGY CONTINUED ## Focused vision, sustainable business, clear goals Key: We are guest We raise We will Our KPIs represent our principal metrics that we focus on in running our guest obsessed business. They measure our progress obsessed the bar grow inraising the bar on our performance and in growing the business. They also help to determine how we are remunerated. Linked to remuneration  These goals relate to our managed and retail pubs.  CORE PUB GOALS | 1 | Loved by guests | 2 | Trusted | 3 | Great place towork | 4 | ‘Never full, fancy another’ sales culture | | --- | --- | --- | --- | --- | --- | --- | --- | | All of our pubs to have a Reputation score of 800 or more | | All of our pubs to be 5* EHO | | Peakon engagement score of 8 or more | | Spend per head vs LY % | | | 2022 | 731 | 2022 | 83.6% | | 7.8 | 2022 | 7.0% | | | | 2021 | 77. 4% | | 7.9 | 20212021 | 12.3% | | | | 2020 | 70.3% | | | 2020 | 9.9% | | To be the ‘best pub around here’ and for our guests | | Prioritising the health and safety of our guests and | | To be a great place to work; engaging with, listening to | | To instil an entrepreneurial mindset and sales culture | | | tosupport us | | ourpeople. | | and enabling our people. | | within our business, maximising the spend per guest visit. | | | Why it’s important | | Why it’s important | | Why it’s important | | Why it’s important | | | Delivering great guest experiences every time ensures | | Ensuring all of our pubs meet these standards is an | | As a ‘people-powered’ business, we want to attract and | | A great pub is never full (we can always fit you in) and | | | our guests will visit our pubs time and timeagain. | | integral part of our commitment to deliver our vision of | | retain the best people. | | great pub teams always ask our guests if they would | | | | | ‘Pubs to be proud of’. | | | | like something else. | | | LINK TO STRATEGY | | | | LINK TO STRATEGY | | | | | LINKED TO REMUNERATION | | LINK TO STRATEGY | | LINKED TO REMUNERATION | | LINK TO STRATEGY | | CORE CORPORATE GOALS 5 Better than the rest 6 Responsible business 7 ‘Back to a billion’ To be the no.1 pub company on Reputation.com To remain in the FTSE4Good index Total revenue – £m Free cash flow (FCF) – £m We’ve moved from 4th to 3rd place 2022 3.9 799.6m 2022 55.5m during the 2021/22 reporting year. ## 3rd 2021 3.0 401.7m 2021 (61.0)m We are targeting 1st place. 2020 3.3 515.5m 2020 67.0m Net debt (excluding lease liabilities) – £m | To consistently outperform our competitors from | Demonstrating that we are a responsible and | | To achieve our corporate goals: £1 billion sales and net | | --- | --- | --- | --- | | aguest’s perspective. | sustainablebusiness. | 1,216m | debt (excluding lease liabilities) below £1 billion. | | Why it’s important | Why it’s important | 1,232m | Why it’s important | | We can see how we compare to our competitors in | Creating a sustainable future for our business benefits all | | Reaching our financial goals will stimulate growth and | 1,377m the eyes of the guest. of our stakeholders. value for all stakeholders. LINK TO STRATEGY Note: We’ve made changes to some of our KPIs during the | | | LINK TO STRATEGY | LINK TO STRATEGY | LINKED TO REMUNERATION | reporting year. Further details are set out on page 173. | | --- | --- | --- | --- | --- | --- | | 2022 2022 | | | | | | | 2021 2021 2022 | MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 | | | | | 9 2020 2020 2021 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STRATEGY IN ACTION ## 2022 – A transformational year | In 2021 we launched our new vision | Underpinning this vision are clear operational | change across our business, Underpinning this | | --- | --- | --- | | ‘Pubsto be proud of’ with a purpose ‘to | targets, which are being monitored and | programme was a significant change in the | | bring people together, to create happy, | measured by external platforms, such as | leadership structure within the organisation. | Reputation.com, EHO scores and ‘Your Voice’, memorable, meaningful experiences’, Operationally, we have again strengthened our employee engagement survey powered which embodies our cultural DNA of the team, with around half of the operational by Peakon, together with the evolution of a being a pub operator at our core, whilst field teams joining us within the last year, with stronger sales culture aimed atfurther focusing on consistently delivering high an encouraging blend of industry experience improving footfall into our pubs andspend per levels of guest satisfaction and standards and those from a pure retail background, guest visit. Importantly, the targets set at pub through our great pub teams. bringing further diversity of thought. level align with the incentivemeasures across The calibre of external applicants has been the entire business and workforce, including very strong, demonstrating the attractiveness the Board and Executive team, to provide of Marston’s as a great place to work. consistency of focus at all levels. During the last year, a change management programme has delivered a transformational ### ‘BACK TO A BILLION’ – OURCORPORATEGOALS Our primary corporate goals are defined by two £1 billion financial targets: | | | Achieving sales | | Reducing net debt excluding IFRS 16 lease liabilities | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | of £1 billion | | | | to below £1 billion | | This requires around £200 million of sales growth | | | | | Thisis consistent with our previously | | | | | frompre-pandemic levels. | | | | | statedfinancialstrategy. | | We are making progress on our ‘Back to a billion’ targets. Taking into account the macroeconomic environment, we believe it is appropriate to rebase the net debt target date to 2026. In delivering these goals wewilldrive shareholder value by creating a business thatisgrowingsales, earnings and cash generation, reducing debt levels and increasing theunderlying net asset value (NAV) through increasing returns. 10 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STRATEGY IN ACTION CONTINUED | | Relevant stakeholders | Relevant risks | | --- | --- | --- | | | 1. Guests | 1. Market and operational | | WE ARE GUEST | 2. Communities | 2. Health and safety, food safety | | | 3. Suppliers | 3. Information technology | ### OBSESSED READ MORE ON PAGE 21 READ MORE ON PAGE 45 Our immediate priority was our food-led Evolution of our estate ## We always business, and we have a clear journey to During the year we have taken the reposition the trading formats of the food-led opportunity to reposition some elements estate over the course of the next four years. ## put our guests ofour portfolio that have become more We have concluded the same exercise with challenged over time. our c.900 managed and franchised wet-led | first, aiming to | Two for One – 74 pubs | pubs. The review indicated that c.90 pubs | | --- | --- | --- | | | We decided to accelerate the removal | should be converted to the Signature format, | | | ofTwo for One from the portfolio and this | over the next four years, and we are planning | ## delight them wascompleted in September 2022. The to convert our first Signature wet-led pubs conversion, which was implemented at a low in2023. ## every time capital cost, has proved successful, with a Importantly, consistency remains key across 5.1% improvement to spend per head and all formats. Conversion of every pub in our ## they’re in a4% increase in guest satisfaction scores. estate to one of the following three formats is | | Rotisserie – 37 pubs | ongoing and applies to both our food-led | | --- | --- | --- | | our pubs | Our format analysis concluded that most | and wet-led pubs and is independent of | | | ofthe Rotisserie pubs should convert to the | operational model (managed or retail): | Signature format. As such, and as part of the Community: these are good value, local menu rationalisation described below, we pubs at the heart of their community. We are have replaced the Rotisserie menu with the unlocking growth through zoning that clearly Signature menu. As a consequence, we have defines the bar and dining areas of the pub. decommissioned our Rotisserie ovens, which We are achieving growth from increased were inefficient operationally, economically drinks volume. and environmentally. This was completed by Signature: in this format we elevate the the middle of October and is expected to everyday for our guests placing an emphasis deliver c.£1 million of cost and margin on a warm, timeless country-pub atmosphere benefiteach year. with food and drink provenance at the fore. In response to changing market dynamics, We target a frequency of one to two visits per we have categorised all our pubs into three month, in suburban towns and villages where ### HIGHLIGHT OF 2022 core trading formats to meet changing quality of food, a friendly welcome and consumer trends, thereby reducing our Increase in Reputation score in the last familiarity are key drivers. exposure to a pure mainstream offer 12months Revere: this is our most aspirational offer. synonymous with discounting and a focus Guests visiting these pubs have a higher level onprice over experience, and maximising ## 122 of disposable income, eat out frequently and the trading opportunity in each pub. are willing to pay for an elevated experience. In addition, a Signature guest will trade up to a Revere pub or bar for a special occasion. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 11 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STRATEGY IN ACTION CONTINUED WE ARE GUEST OBSESSED Guest driven category management Enhancing the guest journey – menu and range rationalisation As a consequence of the pandemic, Quality of food and drink is the single biggest consumer behaviour and expectations influencer of guest satisfaction and during towards booking and paying have materially the period we have undertaken a full review changed. We are seeing an increased level of both categories. of bookings, rather than impulse visits and, increasingly, there is an expectation that Consequently, we have streamlined the pubs have some form of order and pay at Group’s menus across the estate, significantly table platform. reducing the number of different menus and aligning them to one of the three formats: In response to these behavioural changes, Community, Signature and Revere. We also we have invested in our technology and removed operational complexity and teams as follows: unnecessary costs by reducing the size Bookings: ofthemenu by 35%–50%, whilst remaining We have implemented the Collins booking focused on ensuring our food proposition is system in 542 of our managed and not compromised despite the challenging franchised pubs, focusing on pubs that serve cost headwinds and still maintaining guest food, and have developed the system to satisfaction; our guest and employee ensure a better booking experience for our satisfaction scores have improved. guests and better insight and oversight for This exercise has significantly simplified our our operational and finance teams. business and, whilst the primary drivers of the Order at table: strategy have been guest and operational We have injected additional investment insight, as with the menu rationalisation, this intoOrderbee, our order and pay at table will drive business-wide efficiencies in our platform. Full integration with our existing business going forward. systems now means processing is seamless An efficient supply chain and more focused and we are able to use the platform more menu has also helped us to achieve our target effectively as a tool to drive additional spend of reducing food waste; a key component of per head, as well as providing the guest ‘Doing more to be proud of’, our ESGagenda. witha customisable experience. During thesummer, a trial of the enhanced system delivered an additional c.13% increase spend per head and we believe this to be a key contributing factor to maximising the returns on the planned outdoor investment. 12 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STRATEGY IN ACTION CONTINUED WE ARE GUEST OBSESSED Insight and data driven decisions We have also partnered with a card analyticsagency to help us improve our At the start of the year, we launched a understanding of guest behaviour and spend newguest insight platform, Reputation.com, habits at a local level, which is particularly which generates a Reputation score for important in the current socioeconomic eachpub based on social media feedback, climate and enables us to adapt our regardless of operating model. This platform marketing strategy and ensure it is has embedded in our business with very deployedinthe most effective manner. strong engagement and support from our | pub teams. In turn this has dramatically | Finally, following the internal promotion of a | | --- | --- | | improved the way we engage with and listen | new Director of Insight and the external hire | | to our guests and, as a result, our aggregate | of a new Director of Digital, we have invested | | Reputation score has increased by over | in both our insight and digital teams to ensure | | 100points since inception. We see an | we have the right people and technology | | opportunity to improve this score further and | tobe able to respond quickly and | | we have set a target for pubs to achieve a | appropriately to a constantly changing | | score of 800 (or more). Joining the ‘800-Club’ | market and dynamic. | (in addition to maintaining a 5* EHO rating) triggers an additional incentive payment in our managed and franchised pubs. We have also developed and evolved our internal Business Information (BI) systems. Thishas allowed us to unlock the value of the data we collect by presenting a holistic view of our business, identifying opportunities to grow and allowing us to make data driven decisions at pace and to understand the impact of those decisions in real time. Over the next 12 months we will begin to deploy our BI systems across our estate in an easy, accessible and secure way, giving our operational and pub teams greater insight tohelp them make better business decisions. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 13 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STRATEGY IN ACTION CONTINUED | | Relevant stakeholders | Relevant risks | | --- | --- | --- | | | 1. People | 1. Market and operational | | WE RAISE | 2. Communities | 2. Liquidity | | | 3. Government | 3. Pandemic | ### THE BAR READ MORE ON PAGE 21 READ MORE ON PAGE 45 | | Investing in people | Resourcing | We have established several team member | | --- | --- | --- | --- | | We’re committed | | | networks, including the Marston’s Pride | | | We employ around 12,000 people directly in | Following the appointment of a new Director | | Network, connecting and supporting our our c.500 managed pubs and an estimated of Talent Acquisition and Employer Brand we LGBTQ+ team members, and the Women of ## to each other, 10,000 indirectly in our c.1,000 franchise and have introduced several innovative initiatives Marston’s Engagement Network (WOMEN), leased pubs. Our people are at the heart to improve our recruitment strategy. Given bringing women and allies together in a ofcreating ‘Pubs to be proud of’ and theprofile of our pub teams, app-based ## the business and safeand supportive environment; to make engaging and investing in our teams to help recruitment platforms are becoming connections, facilitate success through strong them improve the performance is critical to increasingly important. Social media platforms peer support, input into key policies and ## being the best our success. such as TikTok and Snapchat are also potential programmes, drive necessary change and recruitment platforms with the potential to empower women in their professional and Reward reach a wider pool of talent. We are working ## version of personal development. We have partnered closely with our agency partners to ensure we We have reviewed our approach to with WiHTL for a number of years, a are directing our digital and recruitment rewardinlight of the inflationary backdrop Collaboration Community devoted to ## ourselves efforts in a focused and efficient manner. | and headwinds we are currently facing. | | increasing diversity and inclusion across | | --- | --- | --- | | Economically, we need to ensure we are | We have long maintained the importance | Hospitality, Travel and Leisure, and are proud | | offering attractive rates of pay relative to | ofapprenticeships in our business. We | signatories of the Diversity in HTL Charter. | | other sectors and, morally, we recognise that | currently have 326 apprentices, which has | | We have also partnered with The Burnt Chef we have a role to play in ensuring our teams doubled since the last reporting period. Project, who provide mental health support can financially navigate through the current Theprogramme extends across the forthe hospitality trade and, with their support, cost-of-living crisis, whilst remaining focused organisation from pub team members this year we have trained hundreds of our line upon delivering our key corporate goals. through to embedded MBA programmes managers in mental health and resilience Tothat end, in March 2022 we increased the andthe launch of the Women in Leadership andwe now have an area on our eLearning minimum hourly wage rates for our pub teams apprenticeship programme during the year. platform, Campus, that is dedicated to the ahead of the national minimum wage rates Through our ESG initiative, ‘Doing more to be Burnt Chef resources and tools to help with for all age groups. The annual cost of this proud of’, we are also trialling the use of mental health. | measure is currently around £3.5 million but | apprenticeships as a way back to work for | | | --- | --- | --- | | we view this as a key investment in people | marginalised groups, including ex-offenders. | We recently became signatories of the | | that will pay for itself through improved service | | Businessin the Community Race at Work | Diversity and inclusion standards and lower churn rates. In addition Charter. The seven key actions we have We have a responsibility to create an ### HIGHLIGHTS OF 2022 to the annual pay review, for our lower paid committed to will improve the quality of environment where people are proud of | | salaried employees, we are making a one-off | | opportunity at Marston’s. During the FY2023 | | --- | --- | --- | --- | | No. of apprentices in our business | | whothey are and feel they can be themselves. | | | | cost-of-living supplement payment in January | | wewill also expand our networks to men, | Wehave a number of partners helping us on 2023. These supplements are banded to raceand ethnicity and disability. ## 326 our journey to a place where everybody can ensure that those paid the least receive the bring their whole self to work. most. For example, all salaried team members earning under £30k per annum will receive the maximum payment of £750. 14 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STRATEGY IN ACTION CONTINUED WE RAISE THE BAR Training and development Operational excellence We have introduced a more agile and We aspire to achieve the goals underpinning dynamic training and development the vision of ‘Pubs to be proud of’ in all of our agendainto Marston’s through our two pubs and we have improved the quality and digitalplatforms, Attensi and Campus, to experience of our operations team this year. ensure we can identify development needs In addition to providing an excellent guest quickly and offer innovative training solutions. experience (evidenced through the Alongside these we have launched a digital Reputation score), we remain focused review platform to facilitate more frequent onensuring that the guest experience is performance and development conversations, delivered in pubs that are also operating to and the ‘Aspire’ programme which is intended the appropriate standards, and EHO scores to develop team members aspiring to run their remain a core pub goal which we measure own pub for the first time. and monitor each month. To support this, wehave launched various initiatives in Communication and engagement thereporting year including a standards drive and a new audit app. Recognising Team engagement is one of the critical theimportance of health and safety, success factors of our business. We have EHOscores are also included in most continued to use our employee engagement ofourbonusschemes. system, Peakon, which enables monthly | feedback to and from our people. Despite | In H2 of 2022 we rolled out a new labour | | --- | --- | | thechallenging backdrop, our Peakon | scheduling system which, amongst other | | engagement remains strong and what is most | benefits, helps ensure that we are deploying | | pleasing is that in the final quarter, over half | the right quantum of labour at the right time | | ofour c.12,000 employees participated in the | in a challenging labour market. | survey each month – an outstanding result foraretail business. We recognise the nexus between engaged teams and performance, and we are committed to further improvement. As described below, the Peakon score forms part of the bonus structure. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 15 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STRATEGY IN ACTION CONTINUED | | Relevant stakeholders | Relevant risks | | --- | --- | --- | | | 1. Pub Partners | 1. Market and operational | | WE WILL | 2. Investors | 2. Information Technology | | | 3. Communities | 3. Political and economic | ### GROW READ MORE ON PAGE 21 READ MORE ON PAGE 45 Effective capital expenditure – We have formalised the planned Creating a stronger sales culture – ## We challenge maintenance programme and reduced the ‘MakeCapex Great’ ‘Never full, fancy another’ maintenance cycle from six to four years. Our One of the key drivers of our plan for organic We are seeking to engender a more aspiration is to reduce this further to three ## ourselves, and growth is the capital investment programme; entrepreneurial culture through all of years, in the medium term. for both the maintenance of our estate and ourpubs irrespective of whether they conversions in line with the estate format aremanaged or a Pub Partnership. Our ## each other, to Continued evolution of franchise aspirations described on the previous page. salesmantra underpins the definition of a Marston’s has been the forerunner of the successful pub – a great pub is never full Our investment capital plans are clearly ## ensure we’re franchise-style model since its introduction (wecan always fit you in) and great pub defined by format and, as such, we have in2009, and it is clear that the owner/ teams always ask our guests if they would clear visibility and a pipeline of pubs we plan entrepreneur mentality of a turnover pub ## always likesomething else. to convert. This provides us with sufficient partner drives sales growth in our pubs. In lead time ahead of the investment itself and Project Boost is designed to create a reward 2021 we introduced a unique new franchise- ## improving permits our commercial, recruitment and structure over and above the base salary style agreement, called ‘Pillar’, which training teams to comprehensively plan, and bonus scheme or Pub Partner share, enabled pubs with an independent food | | execute and support each investment and | | torecognise and celebrate outstanding | | --- | --- | --- | --- | | and moving | | offer to receive all of the positive elements | | | | conversion. In FY2022 we completed 22 | | performance. We removed the cap on our | ofa franchise-style arrangement without transformational conversions and, despite operational bonuses ensuring our pub teams compromising their food proposition. We ## forward the economic environment, we still intend to and Pub Partners are focused on maximising nowhave 64 pubs operating under a Pillar convert the remaining c.100 food-led pubs at sales over and above the annual targets. In agreement. In addition, we are trialling the the appropriate level of investment to addition, we have recently announced a franchise model in four food-led pubs that achieve the format evolution described. series of quarterly ‘retain it or lose it’ reward were formerly part of our managed estate schemes relating to guest satisfaction scores, In addition, our observation following the and it is our intention to extend this trial EHO and employee engagement with the pandemic is that the demand to eat and further in FY2023. qualifying licensees receiving a cash reward drink in high quality outside space is strong at the end of each quarter. and is a differentiator between pubs. As such Developing a stronger digital agenda we are allocating £4 million on a garden We recognised that from a digital perspective investment programme in FY2023, including Marston’s has a significant opportunity to 20 larger garden schemes. grow volume. We have appointed a new ### HIGHLIGHT OF 2022 From a maintenance perspective, it is critical Director of Digital, with an abundance of that the fabric of our pubs is not compromised, sector experience. The digital strategy No. of pubs operating under regardless of format. This supports delivering a wehave subsequently embarked upon aPillaragreement great guest experience as well as maintaining combinesacquisition activity through the the underlying value of our assets. development of third-party partnership ## 64 relationships, and the development of a targeted individualised digital marketing programme aimed at increasing frequency ofvisit from our existing guests. 16 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### GROUP OPERATIONAL AND FINANCIAL REVIEW ## Performance and financial review Financial highlights Within our pub business we operated 267pubs under the traditional tenanted 1 1 Underlying Total andleased model generating revenues of 2022 2021 2022 2021 £42.4million (2021: £25.4 million). It is still our Total revenue £799.6m £401.7m £799.6m £401.7m intention to convert the remainder of the tenanted and leased estate to turnover Pub operating profit/(loss) £115.4m £5.7m £142.1m £(90.5)m based models in the medium term. Share of associate £3.3m £(14.5)m £3.3m £(14.5)m Accommodation sales of £33.1 million Profit/(loss) before tax £27.7m £(101.3)m £163.4m £(171.1)m showsignificant growth (2021: £17.2 million), benefitting from the demand for UK Net profit/(loss) £27.5m £(86.2)m £137.2m £(128.3)m staycations. Earnings/(loss) per share 4.3p (13.6)p 21.7p (20.3)p Net cash inflow/(outflow) incl. IFRS 16 £26.2m £118.1m £26.2m £118.1m Profit Underlying operating profit excluding NAV per share £1.02 £0.64 income from associates was £115.4 million 1 From continuing operations. (2021: £5.7 million) with a margin of 14.4% (2021: 1.4%); H1 margin was 10.8% and H2 Revenue For the year as a whole, like-for-like retail margin was 17.6%. Underlying operating sales are slightly down (1%) relative to 2019 profitincluding income from associates was Revenue increased by 99% to £799.6 million levels, the last pre-pandemic trading year, £118.7million (2021: loss of £(8.8) million). (2021: £401.7 million from continuing which is expected given the impact of operations), principally reflecting recovery Underlying EBITDA excluding income theOmicron variant during H1. However, | | from a period severely impacted by COVID-19 | | fromassociates was £159.6 million | | --- | --- | --- | --- | | Like-for-like retail | | like-for-like retail sales for the 10 weeks to | | | | and the significant restrictions topub trading | | (2021:£48.4million), and underlying profit | theend of the year were 3% up compared ## sales for the 10 weeks during the prior year. before tax was £27.7 million (2021: loss of to2019 and 4% up compared to 2021, £(101.3) million). Profit before tax was | | Trading this year has been impacted by | showing encouraging recovery and the | | | --- | --- | --- | --- | | to the end of the year | | | £163.4million (2021: loss of £(171.1) million). | | | theOmicron variant of COVID-19. Whilst the | positive impact of our strategy. | | FY2021 comparison numbers exclude ## were 4% up, showing pubs were not required to shut in England, Total retail sales in the Group’s 1,198 discontinued operations. government recommendations for social managed and franchise pubs increased by ## encouraging recovery distancing, restricted trading in Scotland The difference between underlying 100% to £734.1 million (2021: £367.8 million) | | andWales and consumer concerns saw a | | profitbefore tax and profit before tax is | | --- | --- | --- | --- | | and the positive impact | | and total outlet sales increased by 101% to | | | | drop in visits and revenue during December | | £135.7 million of non-underlying items, which | £757.2 million (2021: £376.3 million). 2021 and January 2022, the impact of which includes a £109.2 million net gain in respect ## of our strategy. wasan estimated reduction to revenue ofinterest rate swap movements and a of£16million and EBITDA of £8–10 million £21.6million net reversal of impairment to HAYLEIGH LUPINO CHIEF FINANCIAL OFFICER compared to a pre-pandemic financial year. thefreehold and leasehold property values. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 17 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### GROUP OPERATIONAL AND FINANCIAL REVIEW CONTINUED ## Performance and financial review | Interest | Taxation | Non-underlying items | Capital expenditure and disposals | | --- | --- | --- | --- | | Our borrowing is largely long-dated and | Underlying profit before tax was £27.7 million | There is a net non-underlying credit of | Capital expenditure was £70.1 million in | | asset-backed. The securitisation is in place | (2021: loss of £(101.3) million from continuing | £135.7million before tax and £109.7 million | theyear (2021: £46.6 million). We expect that | | until 2035 which provides financing security | operations), upon which the total underlying | after tax. The credit primarily relates to a | capital expenditure will be around £65 million | | and high visibility of future cash flows; this is | tax charge was £0.2 million (2021: credit of | £109.2million net gain in respect of interest | in 2023. Included in this year’s expenditure | | ofparticular importance in an environment | £15.1 million). This gives an underlying rate of | rate swap movements and a net reversal of | isthe refurbishment of our new head office, | | where interest rates are rising to curb | taxation of 0.7% (2021: 14.9%). The effective | impairment of £21.6 million to the freehold | St Johns House, which was largely completed | | inflation. The securitisation is fully hedged | taxrate is lower than the standard rate of | and leasehold property values following the | during FY2022 but will be financed in FY2023. | | until 2035. Other lease related borrowings are | corporation tax primarily due to super- | external estate valuation of the Group’s | | Proceeds of £9.9 million have been realised in index linked, capped and collared at 1%–4%, deductions, post-tax share of income from effective freehold properties and the relation to the disposal of non-core pubs and providing protection against high inflation. associates and a credit in respect of deferred impairment review of the Group’s leasehold unlicensed properties, which achieved a 40% Ofour £280 million bank facility, £120 million tax on property. properties undertaken during the year. higher price than the net book value. isnow hedged. Overall, we are 90% hedged, The total tax charge is £26.2 million Other non-underlying items comprise a providing significant protection against (2021:creditof £42.8 million) on total profit £0.7million charge in respect of the fair Property changes in interest rate movements that may before tax of £163.4 million (2021: loss of valueof the contingent consideration The Group has moved to annual external occur during the year. £(171.1)million from continuing operations), fromthe disposal of the Group’s brewing valuations of its properties and all pubs Since the financial year end, the £60 million with aneffective tax rate of 16%. operations and a £5.6 million credit for VAT willbe inspected on a rotational basis, with | forward floating-to-fixed interest rate swap | | claims submitted to HM Revenue & Customs | | | --- | --- | --- | --- | | | Total tax contribution in 2021/22 | | approximately one third of the estate being | | which was due to take effect from April 2025 | | inrespect of the VAT treatment of gaming | | inspected each year and the remainder was brought forward and started in VAT – £75.1m machines from 1 January 2006 to 31 January subject to a desktop valuation. Christie & Co October2022. 2013. An explanation of non-underlying items undertook an external valuation in July 2022 is included within note 4. Business rates – £27.9m and the results have been reflected in the full Employer payroll taxes – £15.5m The tax charge relating to these non- year accounts. ### £157.2M Other – £3.8m underlying items is £26.0 million. The carrying value of the estate is now Corporation tax – £0.0m £2.1billion and, as a result of the valuation Earnings per share andleasehold impairment review, there is | Total earnings per share were 21.7 pence per | aneffective freehold impairment reversal | | --- | --- | | share (2021: 25.7 pence per share). Underlying | of£88.4 million and a leasehold impairment | | earnings per share were 4.3 pence per share | reversal of £5.0 million, giving a £93.4 million | | (2021: (13.4) pence loss per share). | 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. Employee payroll taxes – £35.0m 18 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### GROUP OPERATIONAL AND FINANCIAL REVIEW CONTINUED ## Performance and financial review Share of Associate (Carlsberg Debt and financing 25January to 6 May and 1 July to 12 August We continued to receive strong support each year reducing to £5 million for the fromour stakeholders for amendments and Marston’s Brewing Company (CMBC)) The Group remained focused on cash | | | remainder of each year – which was not used | worked in acollaborative approach, helped | | --- | --- | --- | --- | | The income from CMBC of £3.3million | management during the year, particularly | | | | | | at the period end; a long-term securitisation | by open andconstructive dialogue in a | | (2021:loss of £(14.5) million) reflects the | during periods where trading was impacted | | | | | | of approximately £655 million – we satisfied | period of uncertainty, which underlines the | | Group’s share of the statutory profit after | by the Omicron variant. We continued to | | | | | | the scheduled repayments demonstrating | importance of good, long-term relationships | | taxgenerated by CMBC in the period. | prioritise cash preservation throughout | | | | | | solid cash generation even under trading | with all our stakeholders, and we thank them | | WhilstCMBC’s results show a recovery from | thedisrupted trading period, but also | | | | | | restrictions in Q1 and, at the period close | for their continued support. | | last year, they also reflect the impact of the | maintained an appropriate level of pub | | | there is £15 million of the £120 million investment to ensure our pubs were well The Group is in positive discussions with Omicron variant during the year; H1 saw securitisation liquidity facility utilised; positioned to deliver our strategy. itslending banks and private placement anoperating loss of £(2.0) million. long-term other lease related borrowings of provider to agree further covenant Dividends from associates of £19.4 million The Group generated a net cash inflow for £338 million; and £378 million of IFRS 16 leases. amendments covering FY2023 before | werereceived (2021: £nil), primarily resulting | the period of £26.2 million including IFRS 16 | | | | --- | --- | --- | --- | | | | The securitisation is fully hedged to 2035. | 31December 2022; these are required due | | from one-off working capital movements. | (£17.7 million excluding IFRS 16). This would | | | | | | Additionally, the Group’s mark-to-market | tothe continued recovery from COVID-19 | | Dividends for this financial year were forecast | have been £48.2 million excluding the net | | | | | | position on its interest rate swaps has reduced | andimpact from Omicron in H1. Given our | | to be £nil at the time of our interim results due | outflow of £22.0 million for the one-off | | | | | | substantially in view of interest rate rises. | experiences to date we are very confident of | | to the significant disruption to trading in the | payments outlined in our interim results | | | | | | Otherlease related borrowing is index-linked | securing these where necessary. This has been | | year (including the impact of Omicron) and | relating to deferred duty/VAT and the | | | | | | capped and collared at 1% and 4%. There are | disclosed as a material uncertainty in the | | the potential for continuing uncertainty | CMBCcontingent consideration. | | | | | | £120 million of swaps against the bank facility: | financial statements. | asaresult of cost inflation, uncertainty Net debt, excluding IFRS 16 lease liabilities, £60 million is fixed at 4% until 2031 and In summary, we have adequate cash resultingfrom the war in Ukraine and the was £1,216 million, a decrease of £16 million £60million is now fixed at 3.45% until 2029. headroom in our bank facility to provide macroeconomic environment. However, from last year (2021: £1,232 million). Total net In the 2021 financial statements it was operational liquidity. There is also a £120 weremain confident that there will be regular debt of £1,594 million (2021: £1,604 million) highlighted that the Group would require million liquidity facility in the securitisation to future dividends from CMBC when there is a includes lease liabilities of £378 million further amendments to its covenants in protect bondholders in the event of a default return to more normalised market conditions. (2021:£372 million). financial year 2022. The Group was granted – this equates to 18 months of debt service There was an operating cash inflow of the required waivers or amendments to its payments. £15 million is currently drawn on this Pensions £134.0million in the year, significantly financial covenants across the lending banks and is included in the above £655 million. The balance on our final salary scheme was aheadof last year (2021: £34.7 million), and private placement provider; these were Importantly, over 90% of our medium- to a£15.1 million surplus at 1 October 2022 which principally reflecting higher profits in required due to the continued recovery from long-term financing is hedged, thereby compares favourably to the £14.4 million theyear. COVID-19 and theimpact of Omicron in H1. minimising any exposure to interest rate deficit at last year end. This improvement Theamended covenant tests were met. increases that may arise over the next The Group has a range of medium hasbeen primarily driven by the increase Nosecuritisation waivers or amendments fewyears. andlong-term financing providing an inthe discount rate assumption, from 2.0% were required. appropriate level of flexibility and liquidity inOctober 2021 to 5.2% in October 2022, forthe medium term: a £280 million bank reflecting the increase in corporate bond facility to March 2024 – at the period end yields since the year end, partially offset by £215 million was drawn providing headroom reductions in asset values. The net annual of£65million and non-securitised cash cash contribution is c.£6m and is only balances were £10 million; a £40 million expected to continue for the next 2–3 years. private placement in place until 2024; aseasonal overdraft of £20 million from MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 19 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### SECTION 172(1) STATEMENT Stakeholder considerations play an Details of our key stakeholder groups, The interests of employees, investors and other stakeholders are taken into account by the important part in the Board’s discussions andhow the Company and the Board Board in all decision-making but particularly so when considering matters of strategic and decision-making process. haveengaged with them during the year, importance. Examples of some of the principal decisions that have been taken during the are set out in the Stakeholder Engagement year and how Section 172(1) considerations have been factored into the Board’s decision- Stakeholder interests help shape our section on pages 21 to 23. Stakeholder making are set out below. performance and, in doing so, promote engagement takes many forms including the long-term success of the Company, Board decision Section 172 duties Board discussion Read more direct engagement with our investors, guests as set out in this statement. and employees and indirect engagement In March 2022, the Board Consequences of • Consideration of the financial Page 19 approved covenant waivers decisions in the stability of the Group and its through regular presentations and reports During the period ended 1 October 2022, the and amendments to the long-term. long-term sustainability for the from the Executive Directors, the Executive Company’s revolving credit benefit of all stakeholders. Board has acted in accordance with section Committee and senior management. facility agreement dated 172(1) of the Companies Act 2006 (the ‘Act’). 7March 2017 and is in Direct employee engagement is conducted Each Director of the Board has acted in a discussions to agree further through Bridget Lea, our nominated Non- amendments for 2023. way they consider, in good faith, to promote Executive Director for Workforce Engagement, | the long-term success of the Company for | | In January 2022, the Board | The interests of a broad | • Consideration of and benefit | | Page 32 | | --- | --- | --- | --- | --- | --- | --- | | | and the Board regularly receives a summary | unanimously agreed a | range stakeholder | | | | | the benefit of its members. In doing so, the | | | | | tothe Company’s employees | | | | of the results of our monthly employee | move away from being a | groups, including the | • The benefit to the long-term | | | Directors have had regard to the interests National Minimum Wage Company’s employees, success of the Company as engagement surveys, from the HR Director. ofthe stakeholders and factors set out (NMW) employer. guests and the aconsequence of improved Pub visits, regular days ‘in trade’ and Board insection 172(1) (a) to (f) of the Act. Government. employee retention rates and dinners provide an additional opportunity Thisincludes the interests of our investors, avoiding the volatility of the forthe Board to engage directly with our labour market. employees, Pub Partners, suppliers and employees and Pub Partners in a less formal • The positive impact on guests, and the impact our pub estate has guestsatisfaction as a result setting. In addition, the Directors engage onthe environment and the communities ofimproved speed of service directly with our investors. Engagement with weserve, whilst maintaining high standards andmore experienced and our suppliers, guests and other stakeholders engaged pub teams. of business conduct. takes place at an operational level through • Supporting the Government The Board recognises the value of engaging and wider community by the relevant senior manager with the Board with stakeholders to understand their views, contributing to economic receiving updates via the Executive Directors. growth. objectives and interests so that they may be Finally, our ‘Doing more to be proud of’ properly considered in the Board’s decision- In October 2021 the Board The impact of • Linking the Company’s Page 24 initiative oversees stakeholder engagement making. Each Director is mindful of their were presented with, and theCompany’s strategy with its ESG strategy, on behalf of the Board on Environmental, considered, our ESG targets operations on the which will benefit a broad directors’ duties and, this year they received | | Social and Governance (ESG) matters and | for Net Zero and food | | | | --- | --- | --- | --- | --- | | | | | community and | range of stakeholders. | | refresher training on those duties and the Act. | | waste. | | | | | further details are set out on pages 24 to 25. | | theenvironment. | | The interests of guests and employees. 20 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STAKEHOLDER ENGAGEMENT Our people Our Pub Partners Priorities Priorities • Pay, benefits and conditions • Support, training and development • Clear, concise communication • Operational success and growth • Support, training and development • Reward and recognition • Wellbeing, diversity and inclusion Our people are the heart of our business. Effective employee engagement is central to our We have around 976 pubs that are operated by self-employed Pub Partners under several types strategy and we recognise that the quality and commitment of our people is integral to our of franchise-style agreements, each providing flexible operating models. Most recently, in 2021, long-term success. Achieving an engagement score of 8 or more on our employee engagement we launched the innovative Pillar Partnership. As with all our franchise-style models, other than survey is one of our Key Performance Indicators (KPIs). We recognise the importance of having an labour, most of the operating costs (such as energy bills and other utilities) are paid for by open relationship with our workforce and investing in tools that empower them to have their say. Marston’s, allowing our Pub Partners to focus on running their business and giving guests thebestpossible experience. How the Board has engaged key topics were discussed: the Directors’ How the Board has engaged • The Board receives separate monthly • All employees are invited to express their Remuneration Policy, communication • As part of the suite of training and support reports from our Operational Directors for views on a confidential basis by completing andcollaboration between teams, and available to them, our Pub Partners receive food-led and for drink-led pubs and these the Peakon employee engagement surveys. alignment of incentive schemes through complementary access to the employee reports include information on our Pub The Board receives a monthly report on the thebusiness. engagement survey operated by Peakon. Partnerships. aggregate engagement score and key This enables Pub Partners to share their themes, and outputs from the surveys are • The Board received presentations from the views and help shape their experience • The CEO and CFO, together with our discussed throughout the year. HR Director and his team on a number of atMarston’s. These scores are included Leadership Group and Operational workforce related matters including the inthe monthly reports seen by the Board. Directors, participate in direct engagement • Bridget Lea is our designated Non-executive People Promise, which has been developed with our Pub Partners throughout the year Director for Workforce Engagement with and refined following feedback from focus by frequent visits to pubs and days in trade. ourworkforce. We were pleased to resume groups from a cross-section of our our programme for employee engagement workforce. this year, following the disruption caused | byCOVID-19. Unfortunately, the planned | • The Board met with a number of senior | | | --- | --- | --- | | ‘inperson’ engagement session coincided | | managers and Pub Partners during the | | with the funeral of Queen Elizabeth II, so the | | year, through presentations at Board | | session was rearranged for the following | | meetings, Board dinners and visits to our | | month (October 2022) and hosted digitally | | pubs, including a day ‘in trade’ for the | | toensure that the majority of the original | | whole Board visiting a number of sites in | | employees were still able to attend. Bridget | | Wales we acquired as part of the | | and Octavia Morley, Senior Independent | | transaction with SA Brain. | 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 READ MORE ON PAGE 60 READ MORE ON PAGE 34 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 21 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STAKEHOLDER ENGAGEMENT CONTINUED Our guests Our suppliers The environment and communities Priorities Priorities Priorities • Speed of service • Long-term supply partnerships • Responsibility and sustainability • Reducing carbon emissions and food waste • Quality of food and drink • Clarity around our strategy, objectives • Social value and purpose for our people, from our operations • Atmosphere and experience and sustainability agenda partners and the communities we serve • Leadership and governance, including • Value for money • Fair and transparent procurement and • The policies and processes we have in transparency in ESG reporting business processes place to protect the health, safety and wellbeing of our people, guests, Pub Partners and the wider community We truly are ‘guest obsessed’ and we Our suppliers play an important role in In line with our corporate goals, we are committed to being a responsible and sustainable consider the voice of our guests in almost helping us deliver our strategy and providing business. We are proud to give something back to the communities we serve and, in doing so, everything we do. Being loved by our guests our guests with the best possible experience. create value for all our stakeholders, including the planet. Both Marston’s and our Pub Partners and achieving a Reputation score of 800 or We value long-term partnerships with our play an active role in our communities, supporting them through charitable endeavours and more, is one of our KPIs. suppliers to form strong, sustainable and generating a positive impact at a local level. We’re committed to doing the right thing and trusted relationships whilst minimising risk in delivering the objectives set out in ‘Doing more to be proud of’, our ESG initiative. The evolution of Reputation generates a score for each of our supply chain. our ESG strategy this year involved us engaging and consulting with a wide range of stakeholders ourpubs based on guest feedback across to understand what ESG topics mattered to them most, including our guests, our people, advisers multiple channels and platforms, such as and experts and other companies within our sector and beyond. 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. | How the Board has engaged | | How the Board has engaged | | How the Board has engaged | | • The Board received an update on actions | | | --- | --- | --- | --- | --- | --- | --- | --- | | • The Board receives a monthly report on our | | • The Board receives monthly updates and | | • The ‘Doing more to be proud of’ working | | | taken during the last financial year to help | | | aggregate Reputation score and how this | | reports from the CFO on any key tenders | | group oversees stakeholder engagement | | eradicate modern slavery, such as our | | | compares to our competitors. Key themes | | and supply chain issues. | | on behalf of the Board on ESG matters. | | useof SEDEX to gain access to ethical | | | and drivers for guest satisfaction taken from | | | | | | information about our suppliers, and | | | Reputation are presented periodically, at | • During the year, the CEO and CFO | | • The Board receives regular updates, reports | | | approved the Company’s Modern Slavery | | | Board meetings by our Commercial | | engaged directly with key suppliers by | | and presentations on how the business is | | Statement in January 2022. | | | Marketing Director and her team. | | participating in meetings and site visits. | | progressing and the initiatives being | | | undertaken across our business. | • The CEO and CFO (together with our | | • Our CEO and CFO are Non-executive | | | | | --- | --- | --- | --- | --- | --- | | | Leadership Group and operational | | Directors of CMBC, our exclusive drinks | • The Executive Committee receives monthly | | | | directors) have direct engagement with | | distribution partner, and provide the | | updates on health and safety and food | | | our guests throughout the year when | | Board with regular updates on supply | | safety compliance and, a monthly | | | visiting pubs on days in trade. | | chain and other matters in support of our | | summary is provided to the Board, in | | | | | 40% share in CMBC. | | addition to the annual presentation from | | • The results of qualitative guest focus | | | | | the Director of Safety. | 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. READ MORE ON PAGE 9 READ MORE ON PAGES 24–40 22 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### STAKEHOLDER ENGAGEMENT CONTINUED Our investors Government and regulators Priorities Priorities • Financial and business performance • Progress against our Environmental, Social • Creation of jobs and investment • Progress against our strategic objectives and Governance (ESG) targets • Long-term sustainable business model • Macro factors, such as consumer • Payment of taxes confidence and inflationary and cost • High standards of business conduct and pressures compliance An analysis of our shareholder register by investor type appears on page 168. Engagement with We take our responsibilities for the health and wellbeing of our guests and employees very our shareholders is essential to ensure that we attract and retain long-term investors who support seriously. Our relationships with our Primary Authority, and various other regulatory bodies, help us our strategy. In turn, we strive to ensure that we provide fair, balanced and understandable to ensure we comply with new and emerging legislation in food and drink, health and safety and information to shareholders and analysts alike, to ensure that they understand and support our beyond. This is supported by the Company’s Risk & Compliance Committee. strategy and vision, and have clarity over our financial and non-financial performance. 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 • Octavia Morley, our Senior Independent How the Board has engaged • Engaging directly with the Pubs Code • The Board regularly receives updates Director, participated in direct engagement • The Board receives regular updates on Adjudicator and providing bi-annual fromthe Chair, CEO and CFO on investor with our largest shareholders on executive labour and resourcing and approved reports on Pub Code compliance to relations and other shareholder activity remuneration, this year. several initiatives during the last financial theAudit Committee, in line with our orfeedback. year, including changes to the National statutory duties. • An investor relations programme is managed Minimum Wage. • Our CEO and CFO have regular face-to- by the CEO and CFO, in conjunction with our • Continued work at a business level with face meetings with analysts, private client advisers, focuses on engagement with • Our Operational Director for wet-led pubs Public Health England, the Office of Health fund managers and large shareholders. institutional shareholders, fund managers, met with various Members of Parliament Improvement and Disparities (OHID) and TheChair and Senior Independent Director analysts and private client fund managers. and the Chair of the All-Party Parliamentary Drinkaware, with any key or strategic have regular contact with investors and Group for Beer, and attended the House of matters being reported to the Board in analysts and are available to meet with • On behalf of the Board, the General Commons to participate in the statutory theCEO’s monthly report. large shareholders. Counsel and Company Secretary oversees review of the Pubs Code undertaken communication with private individual byBEIS. • The Annual General Meeting (AGM), shareholders. The key source of ourAnnual Report and Accounts and our communication is through the Investors • Our CEO regularly meets, and engages website also provide key communication section of the corporate website, which with, UK Hospitality to discuss sector-wide channels for our investor community. provides a wealth of information on our matters. Senior managers and operational Periodic announcements on our business strategy and vision, links to our share price, directors also engage at a business level and financial performance, issued to financial calendar, results presentations byparticipating in working groups and thestock market are also available on and regulatory announcements. consultations. Updates are provided to the ourwebsite. Board in the form of reports and • The AGM provides an opportunity for presentations, from time to time. • Dialogue with shareholder groups and shareholders to attend the meeting in investors on various topics, including ESG. person, to engage directly with the Board or ask questions in advance. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 23 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS ## Doing more to be proud of We are passionate about delivering our strategy, engaging and consulting with our The ‘Doing more to be proud of’ initiative was responsibility at Executive Committee and ESG and sustainability strategy: ‘Doing stakeholders to understand what ESG pillars developed and three distinct working groups business level for ‘Doing more to be proud of’ more to be proud of.’ Whilst there is still matter to them most. We have aligned our have been established with a clear mandate, and oversees stakeholder engagement on ESG strategy to our corporate strategy, and to objectives and targets. Some areas, such as ESG matters on behalf of the Board. more to do, we believe we can make how we operate our business. This alignment health and safety and food waste, naturally meaningful contributions to all our The initiatives we take on ESG are linked has provided clarity of vision, helped establish have more than one touch point and provide stakeholders, from cutting carbon toour key stakeholders and what matters ownership, drive improvements and facilitated more opportunities for working together emissions and tackling food waste, to tothem most, whilst being aligned to improved reporting on the progress that we andharnessing the power of cross- caring for our people and encouraging andforming an integral part of our have made, and will continue to make. functionalexpertise. them to grow, and supporting the corporatestrategy. communities in which we operate. Previously we relied upon an ESG Progress made by all three working groups is Committeeto cover the broad range of regularly reviewed by the General Counsel areas collectively referred to as corporate &Company Secretary, who also has overall Alignment of ESG to our business responsibility. Following engagement with key stakeholders, given the diverse nature At Marston’s we have invested in sustainable ofour stakeholder interests, it was clear that and responsible business practices for many there was an opportunity to better align years, including being amongst the first in our those interests with our structure. Our senior sector to implement environmental initiatives, leaders are empowered to engage with such as zero waste to landfill and the stakeholders at a business and operational installation of electric car chargers across our level, and to deliver the part of our ESG and pub estate. We recognise that there is still sustainability strategy that is most closely more to do, particularly to help protect the affiliated with their individual specialism. planet (our most fragile stakeholder). This year, we have focused on defining our ESG | TARGETS | | ACHIEVEMENTS | | | --- | --- | --- | --- | | • Carbon neutrality by 2030 | | • 7. 8 | | | | (Scope 1 & 2 emissions) | | Employee engagement score | • Net Zero by 2040 • 3.9 (Scope 3) FTSE4Good rating • 50% reduction in food waste by2030 24 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Doing more to be proud of Key: We are guest We raise We will Working together to create a sustainable future for our business, for the benefit of all our stakeholders | | | | | | | obsessed | the bar | grow | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Leadership | | Link to | Key commitments | | | | | | Group Responsibility Key focus areas for2023 | | | strategy | andgoals Other areas of focus | | | | | | | | Net Zero: targets announced and strategy development, including a | | Carbon neutrality by 2030 | • Reduction of energy and water consumption | | | | | | | move towards the electrification of our pub estate supported by | | (Scope 1 & 2 emissions). | • Environmental policy and strategy | | | | | | | internal incentives such as ‘Going Green’ | | | • Responsible management of our pub estate | | | | Net Zero by 2040 (Scope 3) Director READ MORE ON PAGES 26–31 Innovation: adding to the existing 123 rapid EV chargers inourestate of Property and investing in energy efficient technology and equipment Waste and recycling: continue to operate zero waste to landfill and | ENVIRONMENT | focus on reducing food waste volumes | | | | --- | --- | --- | --- | | | Food waste reduction: supported by internal incentives such as menu | Reduction in our food | • Pay and reward | | | rationalisation, ‘Wise up to Waste’ and partnerships including a trial | waste by 50% by 2030 | • Learning and development | | | with Too Good to Go | | • Diversity and inclusion | | | | Employee engagement | • Engagement and communication | | | Employee engagement KPI: continuously listening to our people to | score of 8 or more | • Apprenticeships | Director of Talent inform the agenda for change, delivering our people initiatives and • Health and safety Acquisitionand our ‘People Promise’ READ MORE ON PAGE 32 EmployerBrand SOCIAL Social and charitable partnerships: Burnt Chef, Latitude and the • Supporting local pub initiatives TrussellTrust • Support for our Pub Partners READ MORE ON PAGE 34 Enhanced financial controls: including management review controls To remain in the • Policies, including whistleblowing (‘Speak Up’) and and documentation FTSE4Good index Modern Slavery Statement READ MORE ON PAGE 41 SEDEX companies Policy administration: oversight and ownership Director of • Risk management CorporateRisk ESG data collection READ MORE ON PAGES 43–52 Enterprise Risk Management: strategic alignment to risks, control effectiveness tracking GOVERNANCE Underpinned by strong governance Strong governance framework: embedded through the business, linkedto 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 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 25 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Environment We remain responsive to emerging To achieve our Net Zero target, future technology to prevent further environmental business decisions will need to take into harm, to current economic events, and to account the effect on emissions. As the partnerships which promote and support a business proceeds on the path to carbon better environment and better lives for all. neutrality, operating and procurement costs could be impacted in the short term but Net Zero making these adjustments sooner may mean ## Doing more that we can reduce long-term costs. Our Net Zero targets are: As well as having a positive impact on the • Carbon neutrality by 2030 (Scope 1 & 2 ## to reduce our planet, mitigation and adaption to climate emissions). change presents opportunities including • Net Zero by 2040 (Scope 3). lowering operating costs, reducing • The use of carbon offsets to cover reputational risks and future-proofing the ## environmental remaining emissions, which cannot be business. We are taking an active approach mitigated using other actions. to identify, approve and implement carbon reduction projects. This is a focus for the ## impact Our Net Zero strategy has been developed in Environmental Working Group in the year alignment with the Zero Carbon Forum (ZCF), ahead, together with scoping out how we In recent years our estates team has gained industry a hospitality sector body which shares will deliver our Net Zero strategy. recognition for their pioneering work to reduce emissions expertise for the mutual purpose of achieving atour pubs, reduce water consumption and increase Net Zero. The Forum aims to support the Environmental Working Group recycling levels. sector to decarbonise at pace and to reach Following the restructure of our ESG Net Zero by 2040. Committee explained on page 24, under The ZCF’s data findings for the pub sector thestewardship of our Director of Property, show that 9% of emissions come from Scope 1 weformed an Environmental Working Group. & 2 (e.g. fuel and electricity consumed Itis the responsibility of the group to directly) and 91% of emissions are associated recommend, develop and deliver carbon with Scope 3 (e.g. purchased good and reduction projects which will move Marston’s services and logistics). forward in its journey toward Net Zero. The The key challenges for Marston’s, and our Working Group is chaired by our Energy supply chain, will include: decarbonisation of Manager and includes team members heat generation, procurement of lower fromestates, procurement, finance, pub carbon goods and services, and a move to operations, food development and risk. They Our Director of Property meet quarterly and their work this year has renewable fuels for logistics operations. was awarded ‘The Special included identifying the optimal timing for Residual emissions are likely to remain that Achievement Award’ investment in new technologies, and our cannot be reduced or removed and these atthe Footprint Drinks will need to be offset. progression toward renewable sources Sustainability Awards ofenergy. 26 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Environment Waste and resource management Following taking over the operation of the Our capital maintenance and expenditure In 2019, Marston’s produced 4,247 tonnes SABrain estate, low carbon technologies are programme presents an opportunity to offood waste, and this financial year we We are consistently above a 70% recycling in the process of being rolled out to bring lowercarbon emissions and operating costs. haveproduced 3,266 tonnes. Whilst we rate and have reached as high a rate as 80%. these properties in line with the rest of our The standard measures included in any acknowledge that covers are lower than in We work with waste providers to ensure we estate, including LED lighting and water refurbishment works in our pubs are as follows: 2019, and that there is still work to do, we are operate a zero waste to landfill business and management systems. delighted with what we have achieved so far. all non-recyclables that are able to, go to • LED lighting A summary of the actions we have taken are energyrecovery. Estate management • Insulation and draft proofing as follows: Annually we audit hundreds of our pubs to When new equipment is purchased for our • Heating and hot water controls • Menu and range rationalisation – as set ensure they are utilising their recycling streams pubs, including catering and refrigeration out on page 12, our menus have been • Cellar fresh air cooling and management correctly, to identify more opportunities to items, life cost analysis is completed. This streamlined. As well as responding to systems increase recycling streams and prevent considers the useful life of the equipment, guest preferences, the rationalisation and recyclable items going into general waste. Dependant on the project, and energy costs, purchase costs, servicing review process took into account dishes The audits also enable us to optimise the circumstances of the site, other low carbon requirements and other operational costs that routinely resulted in waste being number of journeys our waste contractors are equipment may also be deployed. ofthe equipment. Whilst this methodology returned to the kitchen; any such items or carrying out, reducing the carbon associated considers life of equipment and energy costs, dishes were subsequently modified or with these collections. Food waste it is recognised that it does not consider the removed. The simplification of our menus Food production is carbon intensive and food full carbon cycle of the equipment, which As well as a waste of resources, food waste has also resulted in efficiencies in our waste compounds the issue. We are working the Environmental Working Group will seek isamajor contributor to global carbon supply chain and stock retention. on initiatives to reduce food waste and to toaddress by aligning our procurement emissions. Tackling it is in line with our strategic • Portion size review – in addition to range, achieve our target to reduce food waste by processes with our Net Zero ambitions. objectives; we know it’s an important issue we reviewed portion sizes to optimise | 50% by 2030, including menu rationalisation. | | forour guests and is intrinsic to raising our | | | --- | --- | --- | --- | | | New equipment and technologies are | | guest preference and reduce waste. | | Further details are set out in the ‘Food Waste’ | | standard of operation, as well as protecting | | | | trialled ahead of any installation to validate | | Inour Signature pubs, chip portion size | | section. Any residual food waste at pub level is | | our operating margin. | | | | the operational efficiency, costs and | | was reduced from 284g to 234g. | taken to anaerobic digestion sites, where it is effectiveness. Trials are either completed in All our food waste is measured by our used to produce biogas and fertiliser. • Supply chain initiatives – working with our training facility or directly in the field to wastecollection partner. We regularly run oursuppliers to reduce waste at depot gather adequate data. Once technologies awareness campaigns for our team members, Capital investment projects level and trialling initiatives such as our are proven, they may be rolled out across to encourage them to segregate food waste partnership with Too Good to Go. During the year, an estate review was ourestate. and maximise recycling opportunities. We completed to identify the position of the monitor the volume of food waste in order to • Education and reward campaigns – raising Old equipment that fails or is beyond estate in terms of efficiency and readiness for identify its cause and assess the effectiveness awareness through in pub campaigns and economic repair is replaced with the latest future investment in low carbon technology. of our campaigns. initiatives such as ‘Wise up to Waste’. specification of equipment. This enables This included: | | improvement in energy efficiency and | We have set ourselves an ambitious target of | • Improved reporting – reporting waste | | | --- | --- | --- | --- | --- | | • Analysis of supplier and EPC data | carbon reductions to be made through | ‘Doing more to be proud of’: 50% reduction | | levels back to pub vs. covers, and the | | | lifecycle replacement, and reduces the | in food waste by 2030. The baseline is | | introduction of an RAG rating for food | • Electric capacity review carbon impacts through manufacturing. financial year 2019 and the first year of waste and working to improve • Current building technology and low thoseratings. measurement was this financial year. carbon installations completed • Review of application of on-site renewable generation MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 27 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Environment We are currently trialling the Too Good to Go app in 6 of our carvery sites which enables us ### EMISSIONS DATA Notes to emissions data: to connect with customers of Too Good to Currently we do not report the Scope 3 emissions by our supply chain. We are working with 1. We report on all the measured emissions Go and repurpose any meals that are left the Zero Carbon Forum and our suppliers to calculate this data in future years. sources required under the Companies Act over at the end of service. We are assessing 2006 (Strategic Report and Directors’ Reports) whether this can be rolled out across more Regulations 2013. ofour pubs in the coming year. As well as an 2. Data collected is in respect of the year ended 30 June 2022, in accordance with the opportunity to reduce food waste destined GHG emissions by source (CO tonnes)2022 2021 2 Streamlined Energy and Carbon Reporting for disposal, it also helps us to appeal to, and regulation. welcome potentially new, guests to our pubs. Electricity and gas 3. Total gas consumption compared to last year increased by 23%. Electricity consumption We also engage with WRAP to explore increased by 20%. To reduce the energy | | 66,672 | | 57,484 | | | --- | --- | --- | --- | --- | | opportunities to work with our wider supply | | | | consumed we focus on various initiatives | | chain to reduce food waste and the | | | | each year. Our catering equipment is | | | | Petrol and diesel | | sourced to increase efficiencies, including | associated packaging waste. fryers that filter oil to increase oil life, and high- | | | 17 | 66 | efficiency chargrills. All of Marston’s cabinet | | --- | --- | --- | --- | --- | | CO | emissions reduction | | | | | | 2 | | | refrigerators purchased are high-efficiency | hydrocarbon units. We install LED lighting in all Our target for Net Zero is explained on the Refrigerants – pubs internal areas, and use integrated movement previous page, together with the initiatives sensors in our back of house areas, reducing ### we have implemented and our focus for the 5,061 5,012 the operational hours of lighting. We installed year ahead. In addition, our ‘Going Green’ voltage optimisation in all of our new-build sites and have retro-fitted them into other campaign was launched this year which is Liquefied petroleum gas (LPG) sitesacross estate. This year, we have also aimed at encouraging our pub teams to increased the proportion of electricity from ### conserve energy and reduce emissions. 1,780 1,700 renewable sources, which now accounts for 10% of the energy consumed. 4. The Greenhouse gas emissions intensity Oil ratiowas distorted in 2021 by the trading restrictions during the pandemic. While we ### 185 302 took steps to reduce energy usage in our pubs when impacted by trading restrictions, we still had to maintain refrigeration, heating Total and lighting in order to trade, particularly in those pubs where the manager lives on site. ### 73,715 64,564 Greenhouse Gas Emissions Intensity Ratio CO e tonnes per £100,000 turnover 2 ### 9.21 16.07 Energy usage (Scope 1 & 2), mwhrs ### 364,867 302,031 28 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Environment – TCFD report This is the first year that we have produced a ### TCFDreport, detailing the impact of climate CORE BUSINESS ACTIVITIES IMPACTED ### changeon our business, which includes the risks IMPACT SUMMARY andopportunities it brings and the pathway towards Two pubs at risk of annual flooding. ## ` achieving carbon neutrality by 2030, and Net Zero by 2040. Flooding damage across the estate over ## Drink supply Food supplyBuildings Logistics ` the past 10 years: £3.2m. to our pubs An Executive summary of the report is includedbelow,and the full report is available at At present, no increasing trend of flood ## ` www.marstonspubs.co.uk. Marston’s is determined damage costs impacting our pubs over to play its part in meeting the challenge posed by ### KEY RISKS AND OPPORTUNITIES FOR OUR BUSINESS the last 10 years. climate change. Our Net Zero plan will align our business to the future low carbon economy. ### POINTS OF PROGRESS Scope 1 & 2 CO emissions Net Zero: move towards the 2 ## ` | | | Extreme weather Legislation | Flooding | | | --- | --- | --- | --- | --- | | 2022 2021 | 73,715 64,564 | | | electrification of the estate. | | Energy consumed by our business (mwhrs) | | Short term (1 to 5 years) Long term (over 10 years) | | | Innovation – installation of 123 rapid EV ## 364,867 302,031 ` chargers in our pub estate, assisting our 2022 2021 guests to move to low carbon transport. We are making progress with industry partners Consumer habits Technology Water scarcity Water conservation – water saved by ## tocalculate the Scope 3 emissions for energy ` operating our own water licence. consumed by our supply chain, and making improvements as data becomes available Energy efficiency within our buildings, ## fromsuppliers. ` ### KEY AREAS FOR ACTION ON CLIMATE CHANGE kitchen and equipment. Review and Our emissions over the last three years were investment. impacted bythe pub lockdowns and trading Procurement Food wastage restrictions in 2021. The increase in emissions and Miles travelled, energy and resources Production, guests, storage and Promoting employee awareness ## ` | energy in 2022 predominantly reflects the lifting | consumed. | supplychain. | through ourcampaigns ‘Going Green’ | | --- | --- | --- | --- | | ofthose restrictions. | | | and ‘Wise up to Waste’. | | | Waste | Energy | | | TCFD disclosure compliance | Packaging waste, plastics, volume and | Sourcing renewable energy, efficiencies, | Guest insight tracking our consumer | ## ` The full financial impact of climate change and recycling levels. mix of sources, reduction and emissions. preferences regarding their choices, price NetZero cannot presently be quantified, though we sensitivity versus climate change impact. 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% OUR NET ZERO TARGET Technology opportunities – investigation ## ` as a potential impact. and implementation of new catering | Climate change viability | | | equipment and building materials and | | --- | --- | --- | --- | | | Carbon neutral by 2030 | Carbon Net Zero 2040 | | | Risks are not significant enough to impact our viability. | | | specifications to reduce emissions. | | Well placed to deal with challenges, seize | (Scope 1 & 2 emissions) | (Scope 1, 2 & 3 emissions) | | opportunities and adapt. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 29 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED Recommendations we have made Recommendations we have been able ## Environment - TCFD report significant progress against, and plan to to fully disclose against. enhance our disclosure further. The disclosures are not fully compliant with the TCFD requirements. This report has followed the guidance set out in Recommendations of the Task Force For metrics and targets (a), we are making progress with industry partners to calculate Scope 3 onClimate-related Financial Disclosures (June 2017) available at www.fsb-tcfd.org. emissions within our supply chain and will include this data within our TCFD reporting when it becomes available. At the time of publication, we have made climate-related financial disclosures consistent with We have not included climate-related financial disclosures consistent with the TCFD the TCFD recommendations in our TCFD report against: recommendations in relation to: • Governance (all recommended disclosures). • Strategy (disclosure (b) – financial impact and disclosure (c) – scenario planning). • Risk management (all recommended disclosures). • Metrics and targets (disclosure (b) – Scope 3 emissions and disclosure (c) targets). • Strategy (disclosure (a)). Due to a lack of reliable data or uncertainty, particularly regarding future weather forecasting, we have further work to do to be able to enhance our disclosures with respect to strategy and • Metrics and targets (disclosure (a)). metrics and targets. That work is underway and, as the availability of reliable data increases in For strategy disclosure (a), further work is underway to enhance the identification, impact and future years, we hope to further strengthen the level of compliance with the reporting for climate-related risks and opportunities, and how these risks map over the short, recommendations. 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. TCFD Report Theme TCFD recommended disclosure 2022 Our disclosure pages Governance a. Describe the Board’s oversight of climate-related risks The Board is responsible for the strategic direction of the Group, including PAGE 6 andopportunities climate-related risks and opportunities. b. Describe management’s role in assessing and The Executive Committee is responsible for ensuring that management PAGE 7 managing climate-related risks and opportunities hastheappropriate resources in place in order to implement our business strategy, including those aspects which connect to climate-related risks andopportunities. Risk management a. Describe the organisation’s processes for identifying The risk register for climate change is managed by the Director of Corporate PAGE 8 andassessing climate-related risks Risk. Formal meetings to assess the risks with the risk owners are held and the assessments are re-evaluated as conditions change, to consider whether the risk could have a material financial impact on Marston’s. b. Describe the organisation’s processes for managing Marston’s has three strategic priorities, each of which are linked to the PAGE 10 climate-related risks effective control of climate-related risks and opportunities. c. Describe how processes for identifying, assessing, and Environmental risks are assessed in terms of their potential to cause significant PAGES 10 –14 managing climate-related risks are integrated into the impact on our business in either a short, medium or long-term timeframe. We organisation’s overall risk management consider how the implementation of identified mitigating factors can support our strategic resilience to climate change. 30 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Environment - TCFD report TCFD Report Theme TCFD recommended disclosure 2022 Our disclosure pages Strategy a. Describe the climate-related risks and opportunities Risks registered, including business impact, mitigations and linked opportunities. PAGES 10 –14 the organisation has identified over the short, medium, and longterm b. Describe the impact of climate-related risks and The report shows the links between our three strategic priorities and the actions PAGES 10 –14 opportunities on the organisation’s businesses, we take for the sustainable management of procurement, food, waste, general strategy, andfinancial planning waste, energy usage and investment. The financial impact of climate change and Net Zero has been quantified as areduction in the long-term growth rate of 0.2%. We hope to provide more analysis in future years as the costs and opportunities become more certain. c. Describe the resilience of the organisation’s strategy, The modelling which is most pertinent to our business is for flooding within the UK. PAGE 15 taking into consideration different climate-related Environmental predictions about climate change within the UK up to global scenarios, including a +2°C or lower scenario warming of 2°C are speculative and impractical, particularly when applied to alarge number of individual properties. As an alternative we have considered which of our properties are in low, medium or high-risk areas for flooding as defined by the Met Office. From our assessment, we do not consider that we have high climate-related viability risk in the short to medium term on our direct operations. Metrics and targets a. Disclose the metrics used by the organisation to assess Marston’s employs the services of an energy bureau (ISTA) to identify our PAGE 17 climate-related risks and opportunities in line with its monthly energy usage per site and calculate the total Scope 1 & 2 emissions strategy and risk management process across our estate. ISTA collect electricity and gas meter readings from our sites, working alongside our Energy Manager to estimate readings, if none are available, and investigate unusual recordings. b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 Marston’s provides a full disclosure of Scope 1 & 2 risks. For Scope 3 emissions, PAGE 17 greenhouse gas (GHG) emissions, and the related risks we are making progress with industry partners to calculate these emissions, and collect the data as it becomes available from suppliers. c. Describe the targets used by the organisation to Our target is our Net Zero plan and our move towards the electrification of the PAGE 18 manage climate-related risks and opportunities and estate. The financial impact of climate change and Net Zero cannot presently performance against targets be quantified. We hope to provide this in future years as the costs and opportunities become more certain. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 31 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## People | | Our people are at the heart of our business | 3. We will grow | | --- | --- | --- | | | and we have a responsibility to support and | Our vision is to be an ‘employer of choice’, | | | develop them to reach their potential. Effective | with a rich and diverse mix of people who | | | two-way communication is also critical: to | reflect the society and communities in which | | | simultaneously inform and listen, to continually | we work and serve. Our ‘People Promise’ was | | | drive both understanding and engagement. | launched in November 2022 and this is a | | Our people at | | huge part of how we intend to bring our | Our people strategy aligns to our corporate vision to life. strategy and purpose, ensuring we remain focused on the people priorities that support This year we have continued to work hard on ## the heart of our and deliver our strategic objectives. further embedding our people strategy, focusing on the follow areas. Our people strategy Areas of focus this year ## business The objective of our people strategy is to engage and enable our teams to deliver Resourcing Our vision is ‘Pubs to be proud of’ and we recognise agreat guest experience, supporting the Following the appointment of a new Director that we need engaged and motivated people to business on its journey to ‘Pubs to be proud of’. of Talent Acquisition and Employer Brand, we help us achieve our vision and strategic objectives. Wherever possible, the initiatives delivered have introduced several innovative initiatives through our people strategy are aligned with to improve our recruitment programme, our strategic objectives. including an app-based recruitment platform READ CASE STUDIES ONLINE facilitating shorter hiring timelines and 1. We are guest obsessed reaching a wider pool of talent. We have also To deliver a great guest experience, the critical improved our digital communication strategy success factors are attracting and retaining the to ensure we are leveraging all social media best people and ensuring that our teams are channels in our search for the best talent. trained to deliver a consistently great guest journey. We use innovative platforms such as Reward Attensi, which delivers training through We recognise that economically we need to gamification, ensuring it is fun as well ensure we are offering attractive rates of pay asinformative. relative to other sectors, in order to attract and retain the best talent. In March 2022 we 2. We raise the bar increased the minimum hourly wage rates in We continually strive for improvement through the business, ahead of the national minimum training and development. This year we have wage rates for all age groups. We view this as continued with our Leadership programme, a key investment in our people that will help Employee Employee engagement which our general managers have engaged improve standards and limit churn rates. engagement score participation for 2022 enthusiastically with, allowing us to identify Weare also making a one-off cost-of-living and support talent. We have also invested in supplement to our lowest paid salaried the development of the Leadership Group employees, to help support them financially. ensuring that we have highly skilled and ## 7.8 75% empowered senior leaders committed to raising the bar at every opportunity. 32 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## People | This year, we launched the ‘800-Club’. | Employee engagement | Communications | We continue to see stronger interest in | | --- | --- | --- | --- | | Thisfinancially rewards and recognises our | Employee engagement remains one of | Our internal communication strategy is | professional development from our front | | general managers and Pub Partners who are | ourKPIs and also forms part of our bonus | focused on four key priorities: to inform, to | ofhouse teams too, with 61% versus 39% last | | consistently raising the bar by achieving a | structure. We want our people to be engaged | inspire, to engage and to enable. This year we | year in chef apprenticeships. Participation | | Reputation score of at least 800 and an EHO | in their work, supportive of our vision and feel | have invested in the way we communicate | inleadership apprenticeships (level 3 and | | score of 5*. | motivated to achieve our strategic objectives. | with our employees and have carefully | above) has continued to increase from 35% | | | To this end, we have continued with our | designed or redefined communication | of all apprenticeships in August 2021 to 47%. | Training and development monthly ‘Your Voice’ surveys, delivered by channels to provide our people with the We have relaunched our Performance, As part of our commitment to raise Peakon and now available to all employees information they need, in the format that is Career & Development Review process awareness of apprenticeships, Marston’s is an and our Pub Partners. The surveys are right for them, enabling them to provide (PCDR). PCDRs provide a framework for award category sponsor for ‘Ladder for the delivered digitally, completely confidential, greatservice – whatever their role. Great regular one-to-one and quarterly reviews Black Country Apprenticeship Awards’ in and provide managers with actionable communication also helps to build an andare now hosted on Marston’s Campus; conjunction with Wolverhampton Council insights and suggested action plans through inclusive culture where people feel welcome. our digital learning platform. This refreshed and the Express & Star newspaper. an integrated dashboard. Some tangible How we treat each other, and our guests, process has enabled a greater focus on School engagement actions we took this year as a result of should reflect the caring culture and values employee development, career progression During 2022 we continued our collaboration feedback received through Peakon include: that define our business. and wellbeing. It also supports our teams to with ‘Loving Hospitality’ engaging with students | be present and passionate about their career | • Enhanced our employee benefits, | | | | | --- | --- | --- | --- | --- | | | | | Apprenticeships | aged 14–16 at National Apprenticeship Shows | | journeys whilst being aligned to our behaviour | | including deeper employee discounts in | | | in Sandown, Milton Keynes, Exeter, Manchester, framework and strategic objectives as both our pubs to support our new menu launch. The number of apprentices in learning is Harrogate, Bristol, and Coventry, to showcase are signposted throughout the PCDR form. continuing to rise across our pubs, bars, and • Improved communication channels, the career opportunities available within pub support centre – from 140 in August 2021 People Promise particularly for the communication of hospitality. Wehave been able to reintroduce we now have 326 apprentices. This is driven We have also been working on our employer ourstrategy and performance against our ‘Take5’ work experience programme, by the improved awareness throughout the brand; our ‘People Promise’ launched in ourKPIs. supporting 20 student placements during business, supported by the PCDR process November 2022. This is the articulation of our the2022 Spring/Summer term. • Increased mileage rates to respond to the anda desire to use on the job training as people offer: the give and the get of working rising fuel prices. apipeline for new talent, or to develop for Marston’s. Building engagement internally, existing employees through accreditation and our reputation externally, our People • Prioritised financial wellbeing through orMBA programmes. | Promise will be used as a narrative and | education tools and financial support | | | --- | --- | --- | | wayofcommunicating with our employees | such as the cost-of-living supplement and | We introduced our Marston’s Chef Academy | | and candidates alike. It was developed by | national living wage increase. | in May 2022, partnering with Lifetime Training. | | engaging with employees at all levels across | | Through a series of masterclass workshops | • Worked with managers to ensure that they Marston’s and it encompasses everything and enrichment days we are offering new understood the link between engagement wedo to position ourselves as an employer and existing kitchen team members the and performance and provided training ofchoice and what sets us apart from opportunity to develop their practical on the Peakon system to ensure that ourcompetitors. cooking skills and acquire new knowledge. action plans were implemented. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 33 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## People Whilst trading conditions have been plethora of e-learning courses, webinars and challenging this year, particularly in the first help with apprenticeships. We also support half owing to the emergence of the Omicron with training record cards for the Pub variant, we have continued to support our Partners’ employees, providing support for Partners to help make their businesses a EHO and licencing compliance, and success. This included additional support for applying for a personal licence to retail ## Our Pub our Partners in Wales, whilst they were subject alcohol via the British Institute of Innkeeping. to extended periods of lockdown, and local FOR MORE INFORMATION ON THE TYPES OF support on a pub-by-pub basis supported by AGREEMENTS WE OFFER, SEE OUR WEBSITE: committed and passionate business ## Partners and WWW.RUNAMARSTONSPUB.CO.UK development managers. We currently offer a range of agreements to This year we have also offered our Pub ## their businesses suit our Partners, from Retail, Foundation and Partners access to Reputation. This enables a tenancy agreement. In 2021, we introduced our Partners to gain the same guest insight our Pillar Agreement, a new style of turnover- Our Pub Partners are an integral part of our business and that has been transformational for Marston’s share agreement which allows our Partners influence the character and diverse mix of our pub estate. and provides a platform for them to listen to, tohave the freedom to implement their own Werecognise that our Partners’ commitment to their and communicate with, their guests as well food offer, but still benefit from all of the businesses is what determines their success. The owner/ as refine the guest experience using positive elements of a franchise model, actionable insights. entrepreneur mentality of a franchisee-style agreement including Marston’s drink expertise and cost helpsto drive sales. We are committed to engaging with our efficiencies. Our Partners are free to innovate PubPartners and have invited them to and their passion creates unique pubs which participate in the Peakon engagement READ CASE STUDIES ONLINE are often at the very heart of the communities surveys. This provided a platform for Pub they serve. We currently have 64 pubs Partners to share their views on a confidential operating under Pillar and we are trialling the basis and help shape their experience at model in 4 food-led pubs that were formerly Marston’s. Like our employees, Pub Partners part of our managed estate. have their own Peakon app, with a personal With our expertise and purchasing power, dashboard to access their own feedback, weare able to provide a package of support and Business Development Managers can and development tools to our Pub Partners. acknowledge and respond to comments as Every Partner receives complimentary access well as develop action plans to address the to Marston’s Campus, our training and issues that matter to our Partners the most. development platform, which includes a Our Pub Partners now have the use of Reputation, for guest insight and Peakon, for employee engagement 34 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## People Our Partner Strategy Our Partners also benefit from the range 5. Investment ofexperience held by our experienced We have the utmost pride in our pub estate, 1. Choice/flexibility management team including our Regional recognising that the character of these The key to success is matching the right pub and Area Managers. buildings is a vital part of the appeal to our ## What attracted me to and the right person to the right agreement. guests. It is also one of our drivers for organic | | We take time to understand the applicants for | 4. Drinks agreement | | | --- | --- | --- | --- | | Marston’s Pillar Partnership | | | growth. Our ‘Make Capex Great’ plans on | | | our pubs; ranging from seasoned licensees | At Marston’s we understand the important | | page 16 includes our Partner Pubs and, at a ## was the ability to still manage with many years of experience, to those who part we play in providing a comprehensive more local level, our estates management have never run a pub before but have a range of quality drinks. Our drinks strategy ## and operate my business helpdesk is always available to support our burning ambition and the right mindset to do isreviewed regularly to ensure we remain ## how I wanted, but I have Pub Partners with maintenance issues, so. We offer a diverse range of opportunities competitive and offer a portfolio which ensuring their pub is safe and inviting for and the type of agreement offered reflects meets with an ever-changing consumer ## support from Marston’s for guests. Some of our partnership agreements the experience, confidence and ambition of demand. The different types of agreements ## maintenance so a lot of stress will see us taking care of all repairs, while the applicant. offer varying degrees of a drinks-tie, but our others share responsibility with the ## in regards to certain bills and experience and guest insight helps ensure If we think that an applicant is unsuitable PubPartner. that all our Pub Partners have access to a ## overheads are gone. I’m still weare honest about that from the outset, range which supports them to serve their recognising that mutual success can only ## in control, I can still create my guests with the drinks they know and love. beachieved in a genuine partnership ## own menu and I am using all arrangement. ## local suppliers, but I have the 2. Training Our Partners are provided with a detailed ## support and the backing from induction and support to open their ## the pub company. business,together with ongoing training and development opportunities through Marston’s NICKY M AYHO Campus or on a one-to-one basis, depending ROSE COTTAGE, OLLERTON on their needs. As well as business acumen and operational excellence, running a pub requires knowledge of many areas of law and compliance, including licensing, health and safety and food hygiene. Our training and support includes everything our Pub Partners need to know; from financial management and stock control to leveraging social media and marketing support. 3. Business support Our Pub Partners are supported by Business Development Managers who maintain regular contact and are always available foradvice and support. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 35 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Community | | As part of the evolution of our pub estate, | Two members of the team from Willows in | | --- | --- | --- | | | wehave categorised all of our pubs into one | Blackburn walked from the west coast of | | | of three core formats: Community, Signature | England to the east in just five days. They | | | or Revere. This simplification of our estate | raised over £3,000 for Derian House, a local | | | enables us to clearly define, and respond to, | Children’s Hospice that provides respite and | | | what the local guest and their community | end-of-life care to more than 450 children | | Our pubs are at | value most. | and young people across the North East. | This year we have refined our social purpose Social purpose agenda under ‘Doing more to be proud of’, ## the heart of their and strong social and charitable partnerships We engaged with our employees will be a key focus for the year ahead under aboutwhich national charity partner the stewardship of our Director of Talent theywould liketo see us partner with, Acquisition and Employer Brand. Our pubs ultimately choosing the Trussell Trust. They ## communities continue to support their local communities provide a nationwide network of food banks and charities and we support and and emergency food and support. We are Our pubs are highly valued by the communities which encourage them to do so. inthe process of finalising how we can help theyserve. We believe that strong local relationships and support the Trussell Trust through corporate understanding what is important to the local guest is essential In May this year, a number of our employees partnership and contribute to ending food for the long-term success of our pubs; irrespective of the took part in a sponsored skydive raising over poverty. We are also trailing Too Good operating model. £13,000 for The Burnt Chef Project, a not-for- toGoin 6 of our carvery sites. Other key profit organisation that is committed to partnerships include our support ofthe Burnt raising awareness of, and providing support READ CASE STUDIES ONLINE Chef Project and the Latitude programme for, mental health issues within hospitality and more information can be found on our across the world. More information on the website: www.marstonspubs.co.uk. Burnt Chef project can be found on page 14, including how we have partnered with Burnt Marston’s Charitable Foundation Chef to provide training on mental health in Marston’s Charitable Foundation re- the workplace. launched this year. This scheme enables our employees to donate directly from their pay, Our Pitcher & Piano team in Hitchin won to support causes close to the hearts of our ourinternal Pride Month competition and pubs and their local communities. We are they were able to nominate a charity for Where local groups exist, our pubs are encouraged to engage encouraging as many people as possible to a£250 donation from Marston’s Charitable withthe following community initiatives; please visit the links below: contribute so we can complement other Foundation. The money was donated to fundraising and help ensure that smaller, MindOut, a mental health charity for the Best Bar None: www.bbnuk.com local charities and causes have access to LGBTQ+ community and this helped pay support, particularly during the tough National Pubwatch: www.nationalpubwatch.org.uk for25 counselling sessions. economic climate. Purple Flag: www.nbcc.police.uk/guidance/purple-flag-scheme 36 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Community Our guest strategy Furthermore, we have transformed our menusacross all the digital platforms. Menu As with all other areas of our business, information is provided to our guests in a clear wherever possible, all initiatives are aligned and engaging way and we have worked with with our strategic objectives: Ten Kites Nutritics to improve the way we We are guest obsessed – using insight led display allergen and calorie information data to dynamically respond to feedback at onour menus, allowing our guests to make ## Offering great pace, aiming to improve the quality of our informed choices more easily. Our menus are guest journey and overall experience. now fully integrated with our websites and can be filtered based on guest preference, ## quality experiences We raise the bar – we constantly seek to allergens or lifestyle choices such as improve guest satisfaction; whether through vegetarian or vegan dishes. improved speed of service from reducing operational complexity, or ensuring we follow We continue to invest in systems and work ## for our guests is our safe and ethical standards. practices that provide accurate information on allergens and nutritional content. From We will grow – aimed at improving our our suppliers through to our kitchens, and to ## top priority margin and increasing our market share. the information provided to our guests, we Wecontinue to work on category plans have worked to enhance the flow of this toimprove our offer, additional revenue We constantly strive to create happy, meaningful, memorable data to increase its reliability and ease of opportunities and more disciplined pub experiences. Providing good food and drink is at the heart of delivery. The system also helps us to monitor investment decisions. our business. Keeping that offering special and innovative is criteria important to us as a responsible what our guests love. retailer under our ‘Doing more to be proud Food and drink development of’ initiative, including ensuring that our Our food and drink menus have been suppliers implement responsible procurement READ CASE STUDIES ONLINE reviewed and streamlined during the year. practices and comply with our Food Charter. Aswell 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. Improvement in Reputation score since new menu launch in April 2022 ## 44 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 37 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Community Areas of focus this year Progress against key targets • Implementation of calorie labelling Reputation score onmenus (launched in April this year). Reputation generates an aggregate score for our pubs based on numerous factors, such • Compliance with Natasha’s Law as Google ratings and feedback on social whichintroduced mandatory allergen media. This platform is loved by our teams for information on pre-packed food its simplicity and the impact it can have in preparedon site, including support understanding their local guest preferences forourPub Partners. and concerns, and providing actionable | • We continue to make progress with our | | insights. Our score has increased by 100 since | | --- | --- | --- | | | salt reduction targets set by the Office for | its introduction, but we see an opportunity to | | | Health Improvement and Disparities when | further improve this score and it remains one | | | creating new menu items. We are working | of our KPIs for this reason. | towards the 2024 targets on all our items Allergens and, based on our previous work in this area, we are in a good position to Allergens training is mandatory and achievethese. thisreinforces how highly we value the importance of equipping our teams with • We are continuing to commit to theright knowledge, and responding to the redeveloping all own brand products needs of our guests. We have also launched where egg is used as an ingredient, to be an allergy auditing programme, which cage free by the end of 2025. All shell involves mystery guest visits. eggs in our supply chain have been cagefree since early 2019. 38 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Community We have worked with our suppliers to help We seek suppliers who reflect our own reduce these exposures and to try and corporate values, which is demonstrated findsolutions. during the selection process and supported by accreditations and the use of SEDEX. Despite the adversities and uncertainties in the current market, on the whole, we have Food Supplier Charter been successful with our core food suppliers Our guests have a right to expect a high level ## Our supplier in negotiating and renewing our key of diligence in the sourcing of goods, products contracts. This has demonstrated the and services. With regard to food supplies, our commitment of our trusted suppliers to work food charter sets out our expectations on ## relationships are through the wider issues currently impacting quality of product, traceability of ingredients, upon the economy, and we thank them for ethical approach, sustainable sourcing and their ongoing support. associated labour practices. The Charter also ## fundamental to conveys our expectations for suppliers to Our supplier and procurement reduce their own environmental impact by strategy minimising unnecessary packaging and choosing recyclable materials, wherever ## long-term success Our procurement strategy is built on possible. This forms part of the contractual relationships which create sustainable commitment when onboarding a new supplier. profitability for both ourselves and our The pressure on our supply chains has continued this year as suppliers. Our supplier selection and tender The Charter is reviewed each year and we all manage global and domestic issues, such as price rises, process is designed to ensure that we identify updated as necessary and includes the labour shortages and rising commodity and energy costs. | key commercial/legal risks at the outset and | Office for Health Improvement and Disparities | | --- | --- | | sufficient information is shared by both | 2024 salt targets and calorie targets. Our | | parties. Material tenders are managed by | suppliers work with us to achieve these targets, | READ CASE STUDIES ONLINE dedicated procurement specialists and particularly when new items are launched. supported by subject matter experts, where Inthe coming year, we expect to be able to appropriate. Where possible, we involve our launch a Drinks Supplier Charter in the suppliers in our business plans, building samevein. mutual trust and supply chain resilience. Wevalue long-term relationships, as evidenced by the duration of many of ourcore suppliers of food and services. Suppliers onboarded on SEDEX ## 86 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 39 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RESPONSIBLE BUSINESS CONTINUED ## Community | Impact of border controls | Our drinks supplier: Carlsberg Marston’s | | --- | --- | | The UK Government has delayed the border | Brewing Company (CMBC) | | checks on all goods coming from the EU until | Since October 2020, CMBC has been our | | the end of 2023. The imposition of border | exclusive distributor of drink products and | | controls risks creating delays on the | CMBC has worked with us to meet the | | importation of fresh food and meat from | challenges in sourcing the global drink brands | | Europe. The revised timetable has arguably | enjoyed by our guests. | reduced the strain on food imports and In 2022 CMBC aimed to source 100% of its allowed more time for the UK Government to energy from renewable sources, reduce ensure that the necessary infrastructure and emissions from breweries by 50%, and reduce resource is in place. emissions within its own operations and from its | Ethical sourcing | suppliers by 15%. CMBC is working towards | | --- | --- | | Our preference is to select suppliers who share | zero carbon emissions from its breweries by | | our ethical values on matters such as the | 2030, and a 30% decrease in emissions across | | environment, employment rights, equality, | their supply chain. | inclusivity, modern slavery and safety. Modern slavery We are full members of SEDEX, which is a Our full Modern Slavery Statement is platform used by many companies to share available at www.marstonspubs.co.uk. information on ethical trading, including Theinformation shared by suppliers on SEDEX labour practices. We are working with our includes how they are responding to the risk existing suppliers to ensure that they register of modern slavery, allowing us to follow up with, and provide the necessary information any issues raised. to, SEDEX to enable us to further improve the visibility and reliability of our supply chain. 40 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### 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, togetherwithsignposts 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 keynon-financial matters. Our policies can be found on our website www.marstonspubs.co.uk Reporting requirement Our approach Supporting information Where to find it Sustainability Our ESG initiative ‘Doing more to be proud of’ supports our environmental TCFD report PAGES 29–31 (EXECUTIVE SUMMARY) plans and our commitment to being a sustainable business. Responsible Business PAGES 24 – 40 PAGES 26–31 Environmental www.marstonspubs.co.uk Our people • Marston’s policies are shared with all our employees on our Company Our people PAGES 32–33 intranet ‘the Hub’ and website; many of which can be viewed publicly. Health and Safety Policy • The health and safety of our people and our guests is of paramount ‘Speak Up’ Whistleblowing Policy importance to us. Corporate Hospitality and Gift Policy • Our ‘Speak Up’ Policy and activities are overseen by the Board and Data Protection Policy undergo annual review and campaigns to raise awareness amongst ourpeople. Equal Opportunities Policy • Corporate hospitality – Rules to be followed by all employees governing Equality, Diversity and Inclusion Policy the acceptance of gifts or hospitality, the approval process and reporting. Food Safety Policy • Competition law – Outlines Marston’s overarching commitment Fraud Policy andpractices to comply with the relevant legislation on competition lawmatters. Group Purchasing Policy Human rights Modern Slavery Statement PAGE 4 0 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 Audit Committee Report and Wales and their tenants. Information from the Pubs Code Adjudicator can be found at: www.gov.uk PAGES 69–71 • Food Supplier Charter – A combination of training, compliance testing, internal and external auditing and assurance www.marstonspubs.co.uk gathering contributes to the due diligence of the policies that support our approach to the five key non-financial matters. PAGE 37– 38 • Food information system – Food ingredient information collected from our suppliers used to formulate our dishes, identify allergens and communicate food constituents to our guests. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 41 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NON-FINANCIAL INFORMATION STATEMENT CONTINUED Reporting requirement Our approach Supporting information Where to find it Anti-bribery and Our Anti-bribery and Corruption Policy sets out our commitment to Anti-bribery and Corruption Policy www.marstonspubs.co.uk conducting our business operations in a fair and ethical manner and our zero corruption Anti-money Laundering Policy tolerance approach to any form of bribery or corruption from our people, suppliers or any third parties. 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 PAGE 7 • KPIs PAGE 9 PAGES 43 – 52 • 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. 42 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT ## Managing uncertainty and new opportunities The pandemic at the start of the financial year Whilst the economy adjusted following including: inflation, energy prices, labour This in turn informs the practices and policies continued to influence trade in the hospitality thepandemic, the global demand for shortages, global demand, andrecession. which we follow, and the emergency plans sector. Our trading environment in that period commodities, technology and energy we adopt. Our people strategy and External factors will always change the risks was caught between a confluence of intensified as demand in many areas out- behaviour framework is aligned with our faced by our business, many of which, such challenges; supply chains globally were still stripped supply. Our food supplies, in particular corporate policies to articulate what the aspandemic, are unavoidable and must be being impacted, risking shortages of products. those from overseas, require unimpeded business expects of our employees. robustly mitigated if our strategic objectives routes of transport in order to remain fresh. For our pub teams, we experienced a higher are to be met. Our risk management However, the delivery of goods to our pubs has number of team absences due to COVID-19. processes aim to anticipate risks before they Our appetite for risk remained strong despite these challenges. Recruitment has been ever more challenging impact upon our activities, to ensure that we Marston’s is open to taking risks, as the labour market has tightened. As a result, The new risk environment and the changing are in the best place to mitigate them and providing those risks align with, and help the pre-Christmas period – which is normally a dynamic of our guests, together with a recognise the opportunities they bring in a us to achieve, our strategic objectives in buoyant time for trade – was distinctly muted resurgent demand amongst people to competitive marketplace. Our guests have a a responsible way and within agreed by people’s nervousness about meeting in meetand enjoy pubs, created a unique high expectation that our business operates in parameters. Marston’s will, wherever groups before the holidays. opportunity for us to re-evaluate our place a safe manner, upholding the high quality of possible, remove those risks completely inthe market. We realigned the management the drink and food sold and our reputation for In order to protect the liquidity of the that pose a threat to achieving the ofour estate and relaunched our offering, excellent service. business, Marston’s has cut costs, reduced strategic objectives. If avoidance is incollaboration with our suppliers. This capex and secured temporary waivers from Risk management is primarily aimed at the impossible, Marston’s will seek to mitigate opportunity has allowed us to understand our our bondholders to breach covenants. This control of uncertainty. For all our key risks, we risk by investing in effective controls or by guests in more depth and thereby identify the has allowed the business to manage its identify the key mitigating controls and their sharing risks with a third party. These commercial opportunities across our estate, financial risks and operate well within its ownership. Our assurance activities are controls are managed and monitored byadapting the pub format to closely match financial cash headroom. The business focused upon those key risks so that we togive assurance that the risk level is in local demand. The opportunity allowed us focused on prudent cash management and continually understand the strength of our accordance with the parameters set tocompletely relaunch our menu in time for the continued organisation of the business controls. Maintaining a strong relationship with bythe Executive Committee. It is our Easter, stripping out what was less important to into a pure pub operator. our guests is implicit to our success. Our guest understanding that our overriding our guests and ensuring that the items which surveys provide essential information about principle of care for our stakeholders, At the beginning of the year our IT network mattered the most were best in class. our levels of service. We manage the risk to ourcommunities, and the environment was still running many of the core processes reputation by using Reputation.com to collect isa priority for our strategic objectives. for CMBC, such as the sales order process Risk management at Marston’s social media scores across all our managed We continually review risk to ensure we andpayroll. This was always planned to be The Board and Audit Committee recognise and retail sites. The scores help us to direct guard against any threats to health, ashort-term measure to minimise any risk of theimportance of sound risk management focus on those sites where improvements will hygiene or safety. disruption or loss of data from the separation inorder to achieve our strategic objectives. matter the most. of our businesses. During the year, our IT This statement represents the Board’s We continually assess the threats and network was separated completely from We build resilience into our supply chain while appetite for the level of risk which it is opportunities and design our risk CMBC. This required careful project recognising the commercial importance of prepared to accept to achieve its business management processes so they are integral management and control of risk to taking risks within an acceptable tolerance. strategy. The Board proactively seeks to toourbusiness and fit to meet the changes ensurethat both businesses’ operations We invest in our IT network to ensure there is understand the risks faced, and a shared inthisoperating environment. The trading wereunaffected by the transition. enough capacity and resilience to mitigate understanding of the risk management environment in which our business operates the threat of disruption. We actively consider practices operated and their degree The continuous operation of our supply chain changed as a result of the pandemic. These and rehearse unexpected scenarios which ofeffectiveness. was at a higher level of risk during the year. changes have been compounded by other could impact upon us at short notice. global, economic and geopolitical factors MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 43 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED ## Managing uncertainty and new opportunities Current key risk drivers by management. Managers’ bonuses are F. Energy/TCFD movement in prices depending upontheir impacted by the safety scores. Our sites’ The volatile energy market this year has own contracts. Climate change will impact A. Pandemic safety scores have improved during the year impacted upon the prices that we can lock upon future energy costs and theinvestment The risk posed by COVID-19 has receded since by instilling a safety culture. Food safety has gas and electricity into. Furthermore the necessary to decarbonise ourbusiness. last year. There remains a risk that new waves been improved by the development of our energy market could contribute to the Therisks and opportunities associated of infection, or new variants of the virus, might food information system, allowing for a more economy going into recession. Our energy withclimate change for our business are influence our guests’ visits or Government accurate flow of information about the contracts bring some certainty to the cost of setout, this year, in our first TCFD report, policy if the NHS comes under further strain. ingredients in dishes from our suppliers energy in the year ahead for our managed which is available to download from Additionally, there remains the risk in the future toourguests. and retail pubs. However, our Pub Partners’ www.marstonspubs.co.uk. that a new form of pandemic could impact businesses are individually exposed to the upon our trade. While this risk is small, because D. Operational risk: supply chain it uniquely has the possibility of closing our During the year, our industry has experienced pubs, it is necessary for us to continually review disruption to its supplies of some food and Principal risks our resilience to such a crisis. drink items. We have worked with our suppliers to identify problems early so that The risks are plotted on the matrix according to impact and likelihood. B. Liquidity substitute items can be arranged that have The placing of the risk reflects the position after the mitigation by controls. The disruption to trade caused by the not diminished our guests’ enjoyment. The pandemic and the consequential impact Government has further delayed the full Key: onprofitability could affect the Group’s ability border checking of goods coming from the to gain additional financial backing. The Reducing EU in order to ease the pressure on supplies Group secured waivers from its banks and Less movement already stretched. bondholders recognising the exceptional Increasing | nature of these circumstances. The Group | E. Operational risk: recruitment and | | | 2 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | hasa stated aim to reduce debt which | retention | | | | | | | | willinturn mitigate liquidity risk. Since the | Since the pandemic there has been an | | | | | | | | tradingrestrictions on pubs were lifted last | increased number of vacancies within | | | | | 6 | 8 | | year the demand for our pubs and room | thehospitality sector. Recruitment remains | | | | | | | | | | 4 | 3 | 5 | | | | | accommodation has rebounded, | challenging. To mitigate this, the business has | | | | 1 | | | Impact demonstrating our long-term viability. reviewed its competitiveness at recruiting 7 | Amaterial uncertainty over going concern | thebest people. We actively manage the | | --- | --- | | has been disclosed in the financial statements | engagement of our people, surveying and | | as we expect to seek further covenant | reporting back to our teams the steps taken | | amendments before 31 December 2022. | to address their concerns and listening to | their suggestions. We act to keep pay C. Health and safety, and food safety andrewards competitive and respond The safety of our guests and our people is a quickly when issues regarding retention priority for our business. Our team of safety areidentified. | specialists work with our operational teams in | | Likelihood | | | --- | --- | --- | --- | | order to advise on safety, risk assess, formulate | 1. Market and operational | | 5. Financial covenants and accounting controls | | policy, investigate accidents and track the | 2. Pandemic | | 6. Political/economic | | safety scores for each site. Sites are regularly | 3. Liquidity | | 7. Information technology | | | 4. Health and safety, food safety | | 8. Energy | externally audited and the results acted upon 44 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED ## Our principal risks and uncertainties Risk movement key: Increased Decreased No change 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. Linked opportunity key: This is not intended to be a complete assessment of all risks as the Group risks change over time. Risk Description Potential impact Mitigation 1. MARKET AND During the current cost of living crisis, including high inflation and • Reduction in the number of sales or • Continual assessment of guest preferences; market and consumer price sensitivity, there is an increased risk that our prices lost opportunities to increase our consumer insight data ### OPERATIONAL become uncompetitive. Inflationary pressure on costs might be value proposition • Continual analysis of sales performance data of single sites LINK TO STRATEGY difficult to pass on, resulting in reduced margin. • Reduction in guest satisfaction and by pub format Marston’s revenue is dependent upon being able to offer, and levels and repeat visits to our pubs • Pricing strategy built upon careful analysis, in sufficient attract, our guests to an enjoyable experience of high quality food • Increased costs as a result of detail, of guests’ sensitivities and drink at the right price. It is reliant upon attracting existing seeking alternative suppliers • Marketing, including digital marketing campaigns guests back and winning new guests. To achieve this we compete for high calibre people to operate our pubs and focus heavily upon • Tracking guest feedback on Reputation.com and targeting their training and management. We carefully choose our suppliers our sites with improvement and the food and drink offered to our guests. Uninterrupted • Cost control, including menu margin analysis operations are dependent on the continual supply of goods and services, often from single sources. The operational performance • Investment, location and design of our pubs ofour suppliers is materially significant to our total profit. • Continual awareness of our people offer compared to our Failure to attract or retain the best people can impactour pubs’ competitors through participation in appropriate networks performance. Recruitment is more competitive due to a tightening • Improved training, induction and development labour market and wage inflation. Disruption to key suppliers, programmes particularly those closely involved with our day-to-day activities orshortage of commodities could significantly impact our • Tracking the engagement of our employees and operations. Disruption to food supplies from the EU due to identifying action points for teams administration, or customs checks, could impact upon our offering • Continual assessment of suppliers’ resilience and capacity to guests if we were unable to find substitutions. These factors • Contingency planning with suppliers: identifying how could mean over time that our pubs fail to attract guests, or do products or services can be substituted notreflect changing preferences, or offer poor service or quality. 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. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 45 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED Risk movement key: Increased Decreased No change ## Our principal risks and uncertainties Linked opportunity key: Risk Description Potential impact Mitigation 2. PANDEMIC COVID-19 demonstrated how a global pandemic • Ability of our teams to operate safely • Remaining alert to Government advice canimpact our industry and public life. One would • Reduction to the numbers of guests, • Auditing our readiness to implement a response effectively LINK TO STRATEGY anticipate that at some point in the future another and shorter stays at our hotels • Adaption of our pubs to facilitate social distancing pandemic will occur. The severity of a future pandemic • Increased operating costs whenrequired upon human health and the duration of measures taken to reduce the infection rate are uncertain. • Training available for our pub teams There is a risk that a variant of COVID-19 or another form • Building contingency plans for future lockdowns of pandemic causes infection rates to increase, leading • Consulting with our employees during an outbreak on safety to future restrictions on the public and trading concerns and operational issues regulations imposed on pubs and lodges. • 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, aspeople 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. 46 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED Risk movement key: Increased Decreased No change ## Our principal risks and uncertainties Linked opportunity key: Risk Description Potential impact Mitigation 3. LIQUIDITY Our financial strategy is to reduce our debt below The liquidity of the business could come • Seek further covenant amendments to avoid an expected £1billion. The UK economy is likely to go into recession under strain as a result of economic covenant breach at 31 December 2022 LINK TO STRATEGY as a result of high inflation, rising interest rates, rising pressure on the pub sector, particularly • Seek to increase the banking facility through an amend and costs in energy and a fall in consumer confidence. ifrising prices cannot be passed on to extend agreement consumers. Consumers will reduce spending as the economy goes • Reduce debt into recession and as prices rise. The cost of living crisis • Conserve liquid funds by reducing costs created uncertainty regarding consumer behaviour. While in previous recessions pubs have remained • Maintain strong relationships with financial backers attractive and affordable, this might not always be • Lobby Government on the importance of the pub trade to the thecase. 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. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 47 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED Risk movement key: Increased Decreased No change ## Our principal risks and uncertainties Linked opportunity key: Risk Description Potential impact Mitigation 4. HEALTH AND The safety of our guests, our people and the public is • Financial penalties • Embedded health, safety and hygiene management systems fundamental to our activities. We seek to attain the ### SAFE TY, FOOD • Significant damage to reputation • Dedicated safety advisers for our pubs seeking continuous highest levels of safety across our estate. Lapses of ### SAFETY improvement • Increased business complexity safety damage the trust and reputation of the business. impacting upon our guests’ • Regular independent expert safety audits LINK TO STRATEGY The provision of accurate and reliable information on experience • Training of team members including e-learning modules on food, to our guests, is paramount. Our guests trust in our specific risks, such as allergens, for completion by all front and high standards of food hygiene, food preparation back of house team members andquality. • Escalation of potential safety threats to senior operational Breaches of health and safety regulations and food management standards attract media attention and high penalties. • Maintaining excellent levels of compliance through policies, Public concern over allergens still remains high. There is training and monitoring a risk that information is collected incorrectly from our suppliers and/or misinterpreted for our menu items. • Working with our supply chain to maintain accurate records There is also a risk if a team member mis-advises a guest identifying the constituent food ingredients and allergens on ingredients or serves the wrong meal. Increased ofourmeals regulation directly affecting Marston’s or our suppliers • Due diligence on accepting new suppliers, monitoring could increase the complexity of the information to be andtracking all suppliers provided and the cost of compliance. • 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 uponquality 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. 48 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED Risk movement key: Increased Decreased No change ## Our principal risks and uncertainties Linked opportunity key: Risk Description Potential impact Mitigation 5. FINANCIAL The Group’s financial system handles many transactions • Reputation damage and additional • Covenant waiver permission sought from bondholders/ accurately and securely. Accurate reporting is key to financial operating restrictions financiallenders ### COVENANTS, running the business effectively, and in compliance imposed by lenders ### PENSION FUND • Regular detailed management accounts, budgets and forecasts withour financial covenants. ### DEFICIT, AND • Loss of investor confidence • Detailed financial data collected from our sites Breach of the covenants with our lenders. ### ACCOUNTING • Financial auditing of our sites based on data analysis ### CONTROLS Incorrect reporting of financial results. • Constant monitoring of financial ratios The pension deficit might increase if investment LINK TO STRATEGY • Internal and external audits yieldsfall. • Segregation of duties Unauthorised transactions, failure of accounting controls or overridden. • Access controls within our systems Greater responsibility to report on control effectiveness • Levels of authority as a result of the Government’s white paper on ‘Restoring • Commitment to reduce debt Trust in Audit and Corporate Governance’. • 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. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 49 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED Risk movement key: Increased Decreased No change ## Our principal risks and uncertainties Linked opportunity key: Risk Description Potential impact Mitigation 6. POLITICAL Changes to Government policy impact upon the cost • It may be harder to secure long-term • To constantly review the positioning of our guest offer at the base for operating pubs, either positively or negatively. agreements with our suppliers while rightprice point, to maintain or grow margin whilst remaining ### AND ECONOM IC At the same time, economic factors such as the current prices rise and shortages of some competitive LINK TO STRATEGY period of inflation and high demand for certain commodities or products exist • Continue to lobby Government on matters that are likely commodities and products, also impacts our operating torestrict trade or increase costs costs and those of our supply chain. Legislative changes • Continually assess our supply contracts and renegotiate terms also impact business, particularly in recent times the when they fall due move to decarbonise the economy. It remains uncertain how successful the Government and the Bank of England • Where feasible, work with our key suppliers to hold sufficient can be in curbing inflation pressure in the year ahead stocks in the UK to cover short-term disruption and what the impact will be on consumer confidence. • Consider alternative sources of supply if our suppliers have There is a risk that inflation continues to rise, leading to trouble importing goods higher interest rates, increased unemployment, and low • Financial forecasts stress tested based on reduced revenue consumer confidence. The UK as well as many other asaresult of an erosion in consumer confidence countries is at a risk of a deep recession, exacerbated by high energy costs and shortages of commodities. 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. 50 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED Risk movement key: Increased Decreased No change ## Our principal risks and uncertainties Linked opportunity key: Risk Description Potential impact Mitigation | 7. INFORMATION | Our business activity is reliant upon our IT network | • Reduction in the effectiveness of | | • Anti-virus and firewall protection | | --- | --- | --- | --- | --- | | | tocommunicate, operate effectively, serve our | | operations, business interruption and | | | TECHNOLOGY | | | | • Access control, password protection and IT policy adherence | | | guests,process transactions and report on results. The | | loss of profit | | | LINK TO STRATEGY | | | | • Network and device controls and monitoring | continuous operation of our business is dependent upon • Regulatory fines as a result of the loss the uninterrupted running of our computer network, site of data • Penetration testing and remediation links and the internet. The cyber threat has increased in • Reputational damage due to a loss • Cyber defence testing recent years targeting vulnerable businesses with data ofdata theft, data encryption, denial of service and fraud. • Backup procedures Marston’s handles the personal contact details of many • Data recovery plans and rehearsals of its guests who opt to use the Wi-Fi or sign up to receive mails. In addition, the Group retains the • Raising employee awareness regarding IT security employment data for a large number of people. • Data security policies, processes and training Threats to IT are both external and internal and could • Data breach incident response plan and scenario training result in a network outage, loss, theft or corruption ofdata or denial of service. The risk extends to the companies that we share data with for processing orstorage on our behalf. 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. Cybercriminality 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. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 51 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED Risk movement key: Increased Decreased No change ## Our principal risks and uncertainties Linked opportunity key: Risk Description Potential impact Mitigation 8. EN ERGY This risk incorporates both energy price rises, and the • High energy prices have the ability to • Energy contracts to provide stability to the price paid. Gas price wider strategic approach to sourcing energy. Energy impact upon all areas of the economy. fixed until end of 2025, electricity fixed to 31 March 2023 LINK TO STRATEGY prices have plateaued and more recently fallen. The They increase the likelihood, and • Investment in energy saving projects, such as heat source pumps, transition to Net Zero emissions is a challenge for our length of a recession. The positive building management systems, cellar cooling, voltage business and those within our supply chain. The transition impacts are that encourage more optimisation, air-flow rather than ventilation and catering could result in higher costs as a result of investment in new investment in projects for the use of equipment efficiency technology, and from sourcing a higher proportion of sustainable energies, and a greater • Government support for small businesses to cap prices and renewable energy. focus upon energy efficiency guard against the most excessive increases Recent high energy costs have added to inflationary • Transition to Net Zero away from fossil fuels pressure, a reduction of operating margins for many businesses, increased Government borrowing and a • Transition of our supply chain to Net Zero reduced disposable income. Contractual negotiations for • Technological innovation energy play a key role in locking in prices and mitigating the risk of energy price spikes. • Public support and awareness of the need to invest in greentechnology In the long term, higher energy prices could make it more difficult to source renewable energy at a commercial • Investment in the energy performance ratings of our building price. This would increase the risk that the transition to • Evaluation of energy savings projects NetZero 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. 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. 52 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED ## Our levels of defence 1. Management ownership of risk The key features of the internal control • At each of their meetings the Board reviews Risk & Compliance Committee systemare: financial and non-financial progress (Chaired by the General Counsel & andcontrol towards the strategic goals. Control systems Company Secretary) • A clearly defined management structure The Group operates within a clear set of are designed to manage rather than operating within a framework of policies The Committee reviews the identification policies established by the Board, and the eliminate risk. By their nature, such systems and procedures covering authority levels, ofthe principal risks and considers the Executive Committee. Adherence to these provide only a reasonable and not an responsibilities and accountabilities. Policies alignment of internal audit testing. It also policies governs the parameters within absolute defence against material errors, are communicated to the appropriate conducts an examination of areas where risks whichthe business accepts risk. Authority is losses, fraud or breaches of the law. teams on induction and kept accessible on are significantly changing. The Committee delegated through the business to ensure the employee intranet. The policies are kept tracks the emergence of new legislation thatmanagement is empowered to operate 2. Committee oversight under review, updated and communicated andmonitors the Group’s preparation for effectively while staying within the system of when required. Awareness of the policies is The Executive Committee meets regularly compliance. New policies are considered by governance approved by the Board. Our built into our induction and training toconsider how to implement the actions the Risk & Compliance Committee before managers are responsible for identifying risks, programmes. required to achieve business objectives, submission to the Executive Committee and, monitoring them and operating the control andto monitor risks and opportunities. The where appropriate, the Board for approval. environment necessary to mitigate them to a • Embedded risk management into day-to- Executive Committee takes ownership of the level which is within the risk appetite of the day activities. Data Security Committee implementation of the business strategy, the business. Authority levels are aligned with (Chaired by the Director of Corporate Risk) • Continual improvement by reporting on operation of the business to meet operational levels of management and the degree of effectiveness, recognition of weaknesses, and financial targets, and the design of The representatives on the Committee reflect responsibility over risk. Changes to policies additional investment and by encouraging internal controls to reduce risks. The Executive the more significant areas of risk regarding the occur at the instigation of management, in achievement. Committee understands the Board’s appetite protection of personal and commercial data response to either new threats, legislation or for risk. Management is directed to collect and cyber security. Our data security policy new opportunities. • A detailed formal budgeting process for all information in order to measure the control of and management processes are maintained activities, with the annual budget and A record of the key controls is kept in our risk and report to the Executive Committee to to govern legal compliance. All employees projections for future years formally Corporate Risk Register. The managers’ ensure that the business is operating within receive data training on induction and at approved by the Board. assessment of the effectiveness of these therisk appetite. Management considers, appropriate intervals. Data security guidance controls is collected by our Internal Audit team • Established procedures for planning, communicates and implements the decisions is always available to our employees. Our and reported to the Audit Committee and the approving and monitoring capital on risk made by the Board and the Executive data security Incident Response Plan is Board. Internal audit testing is performed on expenditure and major projects designed Committee and continually reports on the stress-tested by scenario planning in order key controls in order to gain sufficient within a sound framework of risk impact of those decisions. toensure an effective response to any assurance on their effectiveness. management. incident. Our Data Security Analyst regularly Within our management structure we • Board approval requirement for all major undertakes desktop and physical audits of operate several committees in order to focus investment, divestment and strategic plans ourthird-party data processors. attention upon areas of risk requiring senior and programmes. management attention: MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 53 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED ## Our levels of defence Business Continuity Steering Committee Enterprise Risk Management (ERM) The Internal Audit plan produced takes into 5. Board/Audit Committee (Chaired by the Director of Corporate Risk) The Director of Corporate Risk operates an consideration the key risks within the business, The Board is ultimately responsible for the ERM process in order to identify, monitor and recorded in the Corporate Risk Register, areas The resilience of the Group to events outside Group’s framework of governance, internal report on those risks which could impact on of increased risk and the regularity of the of its control is considered, and the lessons control and risk management. The mitigation our ability to achieve our strategic objectives. testing. The plan is developed in consultation learned from any actual incidents or scenario of risk is delegated to the Executive Directors The key risks and controls are recorded in our with the Executive Committee and the Risk & tests. The Committee considers the threats to and other senior management. The Board is Corporate Risk Register. The ownership and Compliance Committee and takes into our continual operation, the resilience of our responsible for ensuring that management assessment of risks is discussed and recorded account areas of concern which require business to cope with the unexpected reviews and reports on the effectiveness of the during regular meetings with the relevant and additional assurance from audit testing. Once andthe rehearsal of emergency plans. internal controls. The Board is also responsible responsible managers. The Corporate Risk approved, internal audits are undertaken by Consideration is given to the resilience of our for understanding the nature and extent of Register is shared appropriately with the the Internal Audit team with support from supply chain, our suppliers’ own planning and the principal risks, its risk appetite and the managers in order to keep it current and senior management and, where necessary, our ability to seek alternative supplies at short Viability Statement. relevant to the business. We use common additional resource and expertise are sought notice. The Committee is briefed on riskmanagement tools and language to from an independent professional internal The Management reporting to the Board improvements to IT resilience, its protection engender cross-functional consistency and audit co-source. The annual budget for isinsufficient detail for the Board to assess from interference and its recovery plan. | | measurement across the Group. Levels of | internal audit is approved by the Executive | itsrisk appetite in the context of the risks | | --- | --- | --- | --- | | 3. Assurance governance | insurance cover are managed by the Director | Committee and the Audit Committee. | andopportunities, and to make informed | | | of Corporate Risk, with the authority of the | | decisions in order to accomplish the strategic | | The Risk team comprises the Director | | The Internal Audit team audits the strength | | | | Board, and in consultation with external | | objectives. During the year, the Board has | | ofCorporate Risk and the Internal Audit | | ofour profit protection controls within the pubs, | | | | advisers. New levels of insurance and cover | | robustly assessed the risks and opportunities | | function. The team reports to the General | | using either data analysis to identify pub sites | | | | are considered each year in the context of | | faced by the business, considering the | | Counsel & Company Secretary who can | | ofconcern or following requests from Area | | | | the changing risks and external threats. | | abilityof the business to achieve its | | elevate matters regarding risk, where | | Managers. The results of this testing, providing | | strategicobjectives and the impact appropriate, to the Board. The Director of Internal Audit there is no conflict, are communicated to ofemerging legislation. | Corporate Risk attends the Audit Committee | The Internal Audit team is managed by the | theoperational managers and follow-up | | | --- | --- | --- | --- | | meetings and can raise any concerns | Director of Corporate Risk and is independent | audits can be arranged if necessary to | New Non-executive Directors of the | | regarding risks independently. | from the operations of the business. Internal | measure improvement. | Boardareinducted into the business | | | audit strategy is risk based and testing is | | throughmeetings with senior managers, the | | | focused on principal or material risks. The | 4. Strategic | Executive Committee, the finance team and | | | strategy has been approved by the Audit | | external advisers. This gives new Directors the | The Executive Committee is chaired by Committee and aims to provide a sufficient opportunity to understand the challenges theChief Executive Officer and comprises, level of assurance regarding the strength of forthe business, risks and the controls and amongst others, the two operational directors the control environment as well as supporting processes operated. New Directors are who are responsible for the implementation of continual improvement in risk management. alsogiven a pack of information on business strategy and for carrying out actions directed operations and access to previous Board and by the Board, monitoring performance and Committee minutes as appropriate. overseeing risk management and internal control. Actions required are communicated tothe senior managers within the business. 54 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### RISK AND RISK MANAGEMENT CONTINUED ## Viability statement | In accordance with provision 31 of the | To assess the impact of the Group’s principal | Liquidity (risk 3), both secured debt and | In making this statement, the Directors | | --- | --- | --- | --- | | UKCorporate Governance Code 2018, | risks and uncertainties on its long-term viability, | unsecured facilities, is assessed in the forecasts | carried out a robust assessment of the | | theDirectors confirm that they have a | a severe but plausible downside scenario was | and, in both the base case and the severe but | principal risks and uncertainties facing the | | reasonable expectation that the Group will | applied to the Group’s financial forecasts in | plausible downside case, the Group will be | Group, including those that would threaten | | continue to operate and meet its liabilities, | the form of reduced sales, it has been assumed | required to seek amendments to covenants | its business model, future performance, | | as they fall due, for the next three years. | that variable costs will move in line with the | on its banking facility. Whilst there is no | solvency or liquidity. Principal risks and | | Consistent with the previous year, three years | change in sales volumes. It is assumed that | certainty that these amendments will be | uncertainties set out on pages 45–52 are | | continues to be adopted as an appropriate | theGroup’s financial plans would be adjusted | granted (this has been disclosed as a | theresult of internal risk management and | | period of assessment as it aligns with the | in response to each scenario by reviewing | materialuncertainty over going concern | control processes, with further details set | | Group’s planning horizon in a fast-moving | controllable and discretionary costs alongside | inthe financial statements), given our | outin the Audit Committee’s report on | | market subject to changing consumer tastes | capital investment. | experiences to date we are confident of | pages 69–71. | | in addition to economic and political | | securing these where necessary. In all | | The principal risks currently facing the uncertainties, and is supported by forecasts scenarios the Group continues to remain businessrelate to the continued uncertainty as approved by the Board. It also aligns with profitable with adequate liquidity. surrounding the political and economic the Group’s capital investment plans and environment with regards to the cost-of-living In the forecasted period the Group is required gives a greater degree of certainty over the crisis, (market and operational (risk 1), to refinance its banking facility and private forecasting assumptions used. | | pandemic (risk 2) and political and economic | placement facility in March 2024 and it has | | --- | --- | --- | | The Directors’ assessment has been made | (risk 6) and subsequent variants and the | been assumed that this would be on similar | | with reference to the Group’s current | consequential impact on trading should | terms as the current facility. | | position, its financial plan and financial | anyfuture restrictions be imposed, thereby | | In terms of resilience, the forecast considers planning process, comprising a detailed inhibiting activity and sales income. The market and operational (risk 1), political and forecast for the next financial year, together Group has reviewed this in the forecast economic (risk 6) and energy (risk 8) risks, with a projection for the following two scenarios and sensitivities by incorporating a focusing on the impact on sales with a financial years. The plan also reflects the reduction in sales (downside scenario). Whilst reduction in turnover from fewer guest visits Group’s principal risks and uncertainties set the experience of the cost-of-living crisis and alongside increasing costs from inflationary out on pages 45–52, specifically market and the pandemic could be expected to lead to pressures, interest rate rises and regulatory operational (risk 1), pandemic (risk 2), lasting changes in both consumer behaviour changes. The forecasts took into account liquidity (risk 3), political and economic and competition in the hospitality sector, in market insight and trends based on changing (risk6) and energy (risk 8). making this assessment the Group has taken consumer behaviour and therefore the view that any adverse impact on sales, considered the allocation of capital through reduced visits from the cost-of-living toadaptto these trends. 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. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 55 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CORPORATE GOVERNANCE REPORT # Chair's introduction ![img-1.jpeg](img-1.jpeg) WILLIAM RUCKER MARSTON'S CHAIR # DEAR SHAREHOLDER, I am pleased to present our Governance Report to you, together with reports from the Nomination, Audit and Remuneration Committees, each providing an overview of the key activities undertaken in the last financial year. The main focus of the Board (and all Committees) has been to support 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'. # 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 management team Andrew Andrea was appointed Chief Executive Officer, and Hayleigh Lupino succeeded Andrew as Chief Financial Officer on 3 October 2021. Andrew and Hayleigh are supported by a refreshed Executive Committee including Bethan Raybould, who was appointed as General Counsel & Company Secretary on 1 February 2022. Anne-Marie Brennan retired as Group Secretary on 31 January 2022 after 18 years of dedicated service. The succession pipeline and quality of leadership below the Executive Committee has been further enhanced with the creation of the Leadership Group, comprising 28 cross-functional senior managers reporting directly to the Executive Committee. 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 we continue 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 is set out on pages 24 and 25. # Remuneration Our remuneration principles remain unchanged. We aim to provide remuneration that 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 on pages 72 to 76. In reviewing the Policy, we engaged with our major shareholders, and a representative group from our workforce, to seek their views on our proposals. We thank our shareholders and workforce representatives for their feedback and willingness to engage on these important matters. # Audit The principal responsibility of the Audit Committee continues to be the integrity of our financial 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, and our governance framework supports these. The Board's Section 72(1) statement is set out on page 56, demonstrating how we have fulfilled our section 72 duties, and details of how the Board has engaged with different stakeholder groups can be found on pages 21-23. The 2018 UK Corporate Governance Code (the '2018 Code') has applied throughout the reporting period and the Board considers that we have fully complied with the principles and provisions of the Code. Further explanation of this is set out in the compliance statement on the following page. 56 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Chair’s introduction UK Corporate Governance Code compliance statement The 2018 Code applied to the 2021/22 reporting period. The 2018 Code is available on the Financial Reporting Council’s website: www.frc.org.uk Marston’s PLC was compliant with the principles and provisions of the 2018 Code throughout the reporting period under review. Our Governance Report explains howwe have applied the main principles and, where applicable, provisions of the 2018 Code, through ourgovernance framework, supporting procedures and the work of the Board, its Committees and management. In order to provide a more accessible report, and to avoid repetition, more information can be found on our website: www.marstonspubs.co.uk Board leadership andCompanypurpose ## ` How we engage with our people and our shareholders and what has been on the Board’s agenda this year. READ MORE ON PAGES 23,60 TO 61 Division of responsibilities ## ` Our governance framework and management structure. Further details of responsibilities can be found on our website: www.marstonspubs.co.uk READ MORE ON PAGE 62 Composition, succession and evaluation ## ` Our approach to succession planning, training and induction, this year’s Board evaluation and our approach to diversity. READ MORE ON PAGE 64 1 Audit, risk and internal control ## ` Internal processes and our Audit Committee Report. | | | | 3 | 2 | | | | --- | --- | --- | --- | --- | --- | --- | | Balance between Executive | READ MORE ON PAGE 68 | | | | | | | andNon-executive Directors | | | | | 4 | 2 | | Tenure of Chair and Board gender diversity | | 4 | | | | | 3 Non-executive Directors Remuneration ## ` Details of our proposed Directors’ Remuneration Policy and payments made to Directors during the period. READ MORE ON PAGES 72 TO 94 Female 0–3 years Chair Male 3–6 years Executive Directors Non-executive Directors MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 57 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### BOARD OF DIRECTORS ## An experienced Board Terms of reference for each Committee are available on the Board committees: A Audit Committee R Remuneration Committee N Nomination Committee Denotes Committee Chair Corporate section of our website: www.marstonspubs.co.uk Board skills: Consumer/Retail Hospitality Commercial property People £ Finance ESG N A N R | William Rucker | Andrew Andrea | Hayleigh Lupino | Octavia Morley | | --- | --- | --- | --- | | Non-executive Chair | Chief Executive Officer (CEO) | Chief Financial Officer (CFO) | Senior Independent Director | | Appointed: October 2018, independent | Appointed: March 2009 | Appointed: October 2021 | Appointed: January 2020 | onappointment | | Andrew was appointed CEO from 3 October | Hayleigh was appointed CFO of the Group | Octavia is currently Senior Independent | | --- | --- | --- | --- | | William is a Chartered Accountant with | 2021, having previously been Chief Financial | from 3 October 2021, having previously been | Director at Card Factory PLC and at Crest | | experience in banking and financial services. | and Corporate Development Officer since | Director of Group Finance, and held a | Nicholson Holdings PLC, Non-executive | | He is Chairman of Lazard in the UK and brings | 2016. Andrew joined the Company in 2002 as | number of senior roles for Marston’s Beer | Director at Ascensos Ltd and Chair of Banner | | a wealth of knowledge and experience of | Divisional Finance Director for Marston’s Beer | Company. Most recently, she played a key | Group. She has extensive experience in both | | financial markets, corporate finance and | Company and in 2006 he became Operations | role in creating the partnership between | executive and non-executive roles in retail | | strategy to his leadership of the Board. William | Director for Marston’s Pub Company. Andrew | Marston’s Beer Company and Carlsberg UK. | and multisite companies, having held various | | has recently been appointed as Chair at ICG | was then appointed to the Board as Finance | She is currently a Non-Executive Director of | senior operational and strategic roles across | | PLC, with effect from 31 January 2023, and is | Director in March 2009. He is also currently a | CMBC. Hayleigh is also a Trustee Board | areas of retail. | | also currently Chairman of the UK Dementia | Non-executive Director at Portmeirion Group | Director at the Wolverhampton | | Past experience: Research Institute. William’s City and financial PLC and a Non-Executive Director of CMBC. GrandTheatre. Andrew is a qualified Chartered Accountant Executive and Non-executive Chair of Spicers- experience, alongside his strong stakeholder Past experience: and brings to the Board experience gained in Office Team Group Ltd management skills, ability to help businesses Senior roles held within Marston’s PLC grow and his previous Chairman roles, make financial and commercial roles, including Non-executive Director of John Menzies PLC him ideally placed to be Chair of Marston’s. strategy and leadership, risk management Chief Executive Officer, then Chair, at and mergers and acquisitions. Past experience: LighterLife UK Limited Past experience: Chairman of Crest Nicholson Holdings plc Managing Director at Crew Clothing Co Ltd Roles held at Guinness Brewing Worldwide, Chairman of Quintain Estates and Chief Executive at OKA Direct Limited Bass Brewers Limited and Dolland & Aitchison Developments Non-executive Director of Rentokil Initial plc 58 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### BOARD OF DIRECTORS CONTINUED ## An experienced Board Terms of reference for each Committee are available on the Board committees: A Audit Committee R Remuneration Committee N Nomination Committee Denotes Committee Chair Corporate section of our website: www.marstonspubs.co.uk Board skills: Consumer/Retail Hospitality Commercial property People £ Finance Climate change A A N N N R R R | Bridget Lea | Matthew Roberts | Nick Varney | Bethan Raybould | | --- | --- | --- | --- | | Independent Non-executive Director | Independent Non-executive Director | Independent Non-executive Director | General Counsel & Company Secretary | | Appointed: September 2019 | Appointed: Ma rch 2 017 | Appointed: July 2022 | Appointed: February 2022 | | Bridget is currently Managing Director – | Matthew has significant real estate and retail | Nick has over 30 years’ experience in the | Bethan joined the Company in 2013 as legal | | Commercial at BT Group having previously | experience having previously been CFO and | Leisure sector, having started his career in | counsel, and was appointed General | | held the role of Managing Director (North) | then CEO of Intu Properties plc, until June | consumer goods marketing with Nestle | Counsel & Company Secretary in February | | atJSainsbury plc. Bridget has had a | 2020. Matthew is a qualified Chartered | Rowntree and then with Reckitt & Colman | 2022. She is responsible for managing legal | | distinguished career working across multiple | Accountant (FCA) and has recent and | plc.He recently retired as CEO of Merlin | risk and supporting the Chair and the Board | | leading retail brands and held senior positions, | relevant financial experience, enabling him | Entertainments. Nick is also a Board member | in maintaining high standards of corporate | | spanning a wide range of disciplines including | to contribute effectively to the Group as the | of UK Hospitality. | governance. Bethan also leads the safety, | | sales, operations, marketing, supply chain and | Chair of the Audit Committee. He is also a | | audit and risk functions. Bethan is a senior | Past experience: | digital within retail corporates. | trustee at Charitable Giving. | | solicitor with over 15 years’ experience in | | --- | --- | --- | --- | | | | Chief Executive Officer of Merlin | both private practice and in-house roles. | | Past experience: | Past experience: | | | Entertainments Managing Director (North) at J Sainsbury plc Chief Executive Officer and Chief Financial Managing Director at Vardon Attractions, Officer of Intu Properties plc Director of Stores, Online and Omnichannel Vardon plc atO2 Chief Financial Officer of Gala Coral Group Marketing Director at The Tussauds Group Limited Finance Director of Debenhams plc MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 59 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT ## Board leadership and company purpose Purpose, values and culture Framework. This framework (which also applies shareholders and employees, and indirectly We would like to thank our investor community to the wider workforce) is directly aligned to with others, through sector bodies and reports for supporting this initiative andwould The Board is responsible for establishing our values and purpose, thereby helping to and presentations by Executive Directors, encourage our investors to explore our website theCompany’s purpose, values and strategy promote and embody culture through our Leadership Group and advisers. Details of and online Annual Report and Accounts. Please and plays a vital role in ensuring that the ways of working. theCompany’s key stakeholders and how contact investorrelations@marstons.co.uk Company’s culture is aligned with those values thebusiness and the Board have engaged withany queries. and strategic objectives. Alignment of policies and approach with them, during the year, are set out on The Board plays a key role in helping to ensure In November 2021, the Company set out its pages 21 to 23. 2023 Annual General Meeting (AGM) that our policies and practices, particularly vision and strategy: ‘Pubs to be proud of’, with relating to pay, bonuses and fair working In considering all opportunities and risks that The 2023 AGM will once again be held at clearly defined values, goals and targets practices, are consistent with Company values the Company faces, the Board focuses its theFarmhouse at Mackworth in Derby, one which promote the long-term success of the and support long-term sustainable success. attention on the long-term sustainable success ofour own pubs. Shareholders are welcome Company. The strategy was developed to Further detail on the alignment of our bonus of the business which ultimately generates toattend in person, but we would request reflect the development of our business as a scheme to our values and KPIs (which include value for our shareholders. All proposals and thatyou register your intention to attend in focused pub operator and the values aimed employee engagement) is set out on page 72. business decisions are made for the benefit advance so we can monitor numbers and to capture the essence of the unique culture ofthe Company’s long-term sustainability, ensure that we are adequately prepared at Marston’s. Whistleblowing ensuring they are aligned to our strategy, toaccommodate all attendees safely. The Audit Committee has delegated The Board continuously monitors and assesses purpose and values. The interests of relevant Shareholders will again be given the responsibility from the Board to review the special culture at Marston’s and is satisfied stakeholders are considered as part of that opportunity to ask questions ahead of the mechanisms for reporting matters of concern, that it reflects, and is reflected by, our purpose process and, while the Board recognises that it meeting, using a dedicated email address including an annual review of ‘Speak Up’, the and values; all of which are, in turn, aligned is not always possible for decisions to achieve a (agm@marstons.co.uk) if they are unable to Company’s whistleblowing system, to ensure toour strategy. The Board does this in a positive outcome for every stakeholder group, attend in person. We will ensure that each those mechanisms are appropriate, accessible varietyof ways: the Board considers it has acted fairly and question receives a direct response, with those and meet our expected standards of conduct. transparently in evaluating all decisions. questions pertinent to the business of the Employee engagement KPI alignment and measurement Furtherinformation is set out in the Section meeting published on our website. As set out on page 15, employee engagement A number of our KPIs such as employee 172(1) statement on page 20. is principally undertaken by regular ‘Your To enable all shareholders to vote on all engagement and EHO scores, allow trends in | Voice’ monthly surveys. The Board receives | | | resolutions in proportion to their shareholding, | | --- | --- | --- | --- | | | Company culture to be continually measured, | Annual Report and Accounts | | | regular reports on results and key themes are | | | the voting at the 2023 AGM will be conducted | monitored and reviewed. The Board receives discussed at Board meetings throughout the The Annual Report and Accounts is the main by way of a poll and shareholders are monthly KPI reports, supported by regular year, including employee views on company tool for providing a comprehensive review encouraged to vote as early as possible ahead presentations from the CEO and Executive culture, policies and strategy. The Board also ofthe business, details of our governance of the meeting. The Company will release the Committee. regularly meets with a cross section of our framework in action and annual results. results of voting, including proxy votes on each people and Pub Partners by participating in Thisyear, mindful of our sustainability agenda, resolution, on its website on thenext business Stakeholder engagement days in trade and Board dinners. Bridget Lea is increased cost and the need to reduce our day after the AGM and announce them The Board supports and actively encourages use of natural resources wherever possible, through a regulatory news service. Details of our designated Non-Executive Director for good relationships with all stakeholders, wehave focused our efforts on the online how you can submit questions and cast your Workforce Engagement. recognising their importance to the long- version of the Annual Report and Accounts, votes at the AGM areset out in the Notice of Behaviour framework termsuccess of the Company. In seeking to reducing the number of printed copies to Meeting, which will be made available to The Board, the Executive Committee and understand the views of our stakeholders and ensure minimal waste after fulfilling the shareholders by their chosen method of management, comprising the Leadership be able to fulfil their section 172 duties when requirements of our shareholders who still communication and is alsoavailable on our Group, all lead by example by acting in making decisions, the Board engages directly require printed copies. website. The Board looks forward to meeting accordance with the Company’s Behaviour with some stakeholder groups, including shareholders once again. 60 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Board leadership and company purpose Board agenda and activities during transactional nature that arise outside of the People forward agenda or Board calendar. Directors’ • Recruitment and resourcing updates 2022 strategy day theyear attendance at Board and Committee • Proposals for our new employer brand The Company has a clear strategy for Agendas for each Board meeting are meetings held during the year is set out on ‘People Promise’ growth and the Board is responsible for prepared in advance from a forward agenda page 63. overseeing its implementation by the (for all Board and Committee meetings) which • Employee engagement survey results For the scheduled Board meetings, this year Executive Committee and Leadership is typically prepared on arolling 12-month viaPeakon the Board was pleased to be able to return to Group. In addition to the regular Board basis. Agendas provide the framework for the meeting regularly in person after the lifting of • Approved the employee sharesave meetings, the Board carries out an annual Board to shape and monitor the Company’s the restrictions following the pandemic. Board scheme for 2022 strategic review. This year, the Board held progress towards itsvision and strategic goals. meetings are either held at our offices or at its annual strategy day in Wales, followed Stakeholder focus There are a number of standing or regular one of our pubs, where facilities permit. As by a day in trade visiting a number of pubs • Share price performance and investor agenda items including reports from the CEO, well as providing a catalyst for strategic the Company acquired as part of the relations CFO and members of the Executive debate, these locations provide the Board transaction with SA Brain. The Board was Committee. These update the Board on a • Shareholder feedback with a unique opportunity to engage directly joined by the Executive Committee and a range of matters from financial and with our people and Pub Partners. • Year-end engagement and AGM number of senior managers who helped operational performance to stakeholder facilitate the day and deliver presentations engagement and shareholder analysis. The • Share register analysis On the Board agenda to the Board. remainder of the agenda comprises specific Governance and risk Strategy and performance The outline agenda and key priorities for items for discussion or debate, in accordance • Approval of TCFD report • Received updates on Company strategy, the strategy day were as follows: with the forward agenda or as required in vision and goals, and performance metrics • Considered and reviewed principal risks, response to circumstances or events or as • Presentation and approval of the emerging risks and risk management requested by the Board, the Committees or • Approved a new Commercial Marketing 5-year plan management. strategy, including segmentation of the • Evaluation of Board and Committee • Review of competitor landscape and pub estate and new drinks strategy effectiveness The Board also values presentations from the market opportunities Executive Committee, the Leadership Group • Approved removal of Two for One • Governance Code, Pubs Code and other • Consideration of developing and and their direct reports. The Board also operating format from our managed estate reporting obligations evolving a sales culture and other approved a number of matters during the Finance • Received an update on and approved the innovations to deliver growth year by written resolution outside of the • Bank facility financing and securitisation Company’s 2022 Modern Slavery Statement normal Board calendar. • Defining our employer brand and waivers • Environmental, social and governance developing our ‘People Promise’ The key items on the Board’s agenda during • Reviewed and approved the budget for updates the year are set out below and those on the Presentations were delivered by the financial year 2022/23 and 5-year plan Committees agendas can be found in the • Delegated authorities and potential Executive Committee (including the CEO Committee reports. • On the recommendation of the Audit conflicts of interest and CFO) which informed and facilitated Committee, approved trading updates, open discussion and debate with the The Board had eight scheduled meetings interim and preliminary results and Annual Board. The Company’s brokers also joined during the year, with the addition of two Report and Accounts the meeting to deliver a presentation to unscheduled meetings, held by phone or the Board and the Executive Committee online where circumstances required the • Approval of property disposals on shareholder sentiment and market Board to meet at short notice. Unscheduled analysis. meetings are usually to discuss matters of a MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 61 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Division of responsibilities There is a clear division of responsibility Governance framework between the roles of the Chair and the Chief Executive Officer (shown below). These are ### agreed by the Board. Further details of the THE BOARD roles and responsibilities of each Board member and the General Counsel & Principal Committees Company Secretary are available on our website: www.marstonspubs.co.uk Audit Nomination Remuneration Chair is responsible for: Supporting Committees Management • leading the Board and its effectiveness Risk & Compliance Matters Reserved for the Board Committees indirecting the Company Roles and responsibilities Business Continuity Committee terms ofreference Executive • setting an agenda, style and tone for DataSecurity constructive and open debate Disclosure Treasury • the effective contribution of all Non- Assurance Implementation executive Directors ESG initiative ofstrategy Internal controls, • supporting the CEO in articulating the ‘Doing more auditing, legal and Monitoring purpose, values and culture tobeproud of’ regulatory compliance performance Chief Executive Officer (CEO) is responsible for: ### ENTERPRISE-WIDE RISK MANAGEMENT OUR BEHAVIOURS • setting and implementing the strategic objectives agreed by the Board The governance framework provides a The three principal Committees of the The Board is supported by the Executive • providing clear and visible leadership, structure of effective management and Boarddeal with financial and risk matters, Committee which comprises key members of demonstrating the values and ways of controls to measure and assess performance remuneration and succession planning. the Marston’s management team: the CEO, working that reflect the Company’s and risk and it facilitates the sharing of Eachhas its own terms of reference which are CFO, two pub Operations Directors (one culture information by encouraging strategic debate reviewed at least annually, and updated as responsible for our Food-led pubs and • leading the Executive Committee and and informed and timely decision-making. necessary, before they are considered and onefor our Wet-led pubs and property), senior management in managing the Board papers are circulated well in advance approved by the Board. Reports from each Commercial Marketing Director, HR Director business | | | of each meeting to ensure that the Directors | Committee can be found on pages 65, 69 | and General Counsel & Company Secretary. | | --- | --- | --- | --- | --- | | • ensuring the Board is aware of shareholder | | have sufficient time to consider them before | and 72. | | | | and other stakeholder views | the meeting. | | | 62 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Division of responsibilities The Executive Committee meets informally The Disclosure Committee, comprising the Board and Committee meeting attendance each week to discuss trade for the previous CEO, CFO and General Counsel & Company Scheduled Board and Committee meeting attendance is shown in the table below. The Board week and any issues of concern and, more Secretary, meet as and when required to calendar of meetings is set and reviewed at least 18 months in advance, allowing the Directors formally, almost every month to oversee the discuss matters arising in accordance with to plan their time accordingly. | implementation of strategy and monitor the | the EU Market Abuse Regulation, the | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Nomination | | Audit | Remuneration | | | performance of the business. An agenda for | Financial Conduct Authority (FCA) Listing | | | | | | | | | | Name Board | Committee | Committee | | | Committee | | each formal meeting is prepared in advance | Rules and the Disclosure Guidance and | | | | | | | | from a forward agenda which is typically | Transparency Rules to ensure the Company | Andrew Andrea 8/8 – – – | | | | | | | prepared on a rolling 12-month basis and is, | meets its obligations. | Bridget Lea 7/8 2/3 4/4 3/3 | | | | | | as far as possible, aligned to the Board’s The Supporting Committees’ primary role Hayleigh Lupino 7/8 – – – agenda to ensure the strategic objectives istoprovide assurance to the Board on the Octavia Morley 8/8 3/3 4/4 3/3 and time horizons of the Board and operation of internal controls, auditing and Matthew Roberts 8/8 3/3 4/4 3/3 management are aligned. ‘Pulse Exec’ compliance with legal and other regulatory meetings may also be called from time to William Rucker 8/8 3/3 – 3/3 obligations. This framework is supported and time, outside of the formal meeting schedule, 1 Nick Varney 2/2 1/1 – 1/1 enabled by the risk management process to discuss matters that require focused andour behaviours. The work of our 1. Nick Varney was appointed to the Board on 1 July 2022. discussion, support or approval. In addition to Supporting Committees is described in operational and financial performance, the theRiskManagement section on page 53. Executive Committee regularly reviews guest Tofocus on our ESG initiatives, this year, we and market insight, employee engagement, have changed our ESG Committee and health and safety reports and KPIs. During formed three working groups with deeper the year, the Executive Committee also focus on the individual ESG elements. More considered and approved the ‘People information on our ‘Doing more to be proud Promise’, the Commercial Marketing Strategy, of’ initiative can be found on page 24. operational and strategic matters, such as Documents available at: the exit from the Two for One and Rotisserie www.marstonspubs.co.uk formats, supply issues, property matters, capital expenditure (capex) proposals and • Articles of Association approved internal policies, governance and • Matters Reserved for the Board financial matters (such as new contracts, acquisitions or disposals) within the authority • Committee Terms of Reference limits delegated annually by the Board. • Roles and responsibilities for each Board member MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 63 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Composition, succession and evaluation | Comprising independent Non-executive | to join our business as anadditional Non- | providing an opportunity to engage with | • A presentation on his duties as a director | | | --- | --- | --- | --- | --- | | Directors (NEDs), an independent (upon | executive Director. We consider all our | thesenior employees and their teams. | | of a UK listed company, including Section | | appointment) Chair and two Executive | Non-executive Directors to be independent | Presentations are often arranged to coincide | | 172, the Market Abuse Regulation and the | | Directors, all supported by the General Counsel | and the charts on page 57 show the balance | with an informal Board dinner on the evening | | 2018 Code. | | & Company Secretary, the Board continues to | and tenure of the Board. | before the meeting, typically at one of our | | | • A presentation from the Director of represent a balanced combination of skills, pubs. The Non-executive Directors may also Corporate Risk on the Company’s experience and knowledge pertinent to the Board appointments process attend external technical seminars offered by principal and emerging risks and industry and business activities. Biographical professional advisers and receive internal Through delegated responsibility to the relatedcontrols. details, together with length of service and briefings on emerging legislation, compliance Nomination Committee, the Board has • Introductory meetings with the other external appointments are disclosed on pages and regulatory matters as they relates to the aformal and transparent process for the Directors and separately with the 58 and59. business. The General Counsel & Company appointment of all new Directors. This Company’s advisers. Secretary advises the Board on matters of All of our Directors are expected to processincludes taking account of any gaps governance and is available to all Directors in the Board’s collective skills, knowledge or • Access to the Company’s Board portal allocatesufficient time to discharge their inan advisory capacity, including the experience or any aspect of diversity, whether which includes a comprehensive dutiesand responsibilities effectively and this appropriateness of seeking independent identified by the annual Board composition resources section including material Board isreviewed with the Chair, as part of the annual professional advice. This year, the General review by the Nomination Committee, or documents and information on the Group. evaluation process. Significant commitments Counsel & Company Secretary facilitated an ofthe Directors, outside of Marston‘s, are theannual Board effectiveness review. The • An information pack on the Company’s additional training session for the whole Board disclosed to and approved by the Chair prior selection process is rigorous and transparent policies, practices and corporate on Section 172 duties, the Market Abuse toappointment and where there are any and, if appropriate, the Nomination governance framework. Regulation and other governance and changes. The Company‘s Articles of Association Committee will appoint an expert external compliance matters relevant for the Board, provide authority to the Board toauthorise search agency to support. Candidates from inthe discharge of their duties. potential conflicts of interest and to impose awide range of backgrounds that meet the anyconditions it sees fit. Actual and potential search criteria will be considered and all On their appointment to the Board, all new conflicts are reviewed by the Board on an appointments will be made on merit, with due Directors receive a comprehensive induction annual basis. regard to all aspects of diversity. The search programme coordinated by the General and selection process was supported by Counsel & Company Secretary. The induction All Directors are subject to annual re-election Ridgeway Partners, who have been used programme is tailored to each new Director, by our shareholders after an annual Board previously for recruitment searches. Further depending on their experience and nature of evaluation. Each of our Non-executive Directors details on Nick’s induction are set out below. their role on the Board. For Nick Varney, in the are initially appointed for a three-year term; months prior to, and after commencement of, beyond six years, the appointment is Board training, induction and his appointment, the induction was structured considered on an annual basis having regard development to provide Nick with all the information and to the tenure of the Board as a whole. Where support he needed to understand the the Board considers it would benefit from a As set out earlier in the Governance Report, Company and its strategic objectives, the change, or a retirement necessitates a change, during the year, presentations are given at environment in which it operates, and his role the Nomination Committee will lead the Board meetings by the Executive Committee, on the Board. Briefly this comprised: process for new appointments. Prior to the our advisers and members of the Leadership appointment of Nick Varney, the Board Group. Those presentations are designed to • Introductory meetings with all members of considered the skills and experiences that update the Non-executive Directors and the Executive Committee (comprising would further enhance the Board and were further improve their familiarity with, and both formal meetings and days in trade wholly supportive of the decision to invite Nick understanding of, the business as well as visiting a cross section of our pub estate). 64 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Nomination Committee report I am pleased to see that the Company has ### DEAR SHAREHOLDER, Attendees capable and committed leaders, at its core, As set out in my opening remarks on page 56, and invests in their development. Executive Directors, senior management last year saw a number of key appointments and external advisers may be invited to to strengthen the Executive Committee and We continue to review our succession attend from time totime. the Leadership Group, in addition to the planning strategy to ensure the composition appointment of a new CEO and CFO. The of the Board and senior management Key activities during the business has undergone a period of change teamreflects and aligns with the needs reportingyear and alignment during Andrew’s first year as ofthe business. CEO and the Nomination Committee is • Led the recruitment and appointment pleased that his senior management team is Board evaluation process for Nick Varney firmly established, working well as a team During the year, an evaluation of the Board • Reviewed the structure, diversity, size and focused on delivering our strategy and and its Committees was undertaken in and composition of the Board and achieving the Company’s goals and vision of accordance with the Nomination considered Board succession planning ‘Pubs to be proud of’. I am pleased to present Committee’s Terms of Reference. Further Our responsibilities an update on the Nomination Committee’s | | • Considered this year’s Board | | | information can be found on page 67. I am | | --- | --- | --- | --- | --- | | To monitor the composition of the Board | | | activities during the period. | | | | | evaluationprocess | | satisfied that the Board has a good balance | | and its Committees to ensure the right | | | | of experience, skillset and sector knowledge | | | • Reviewed succession plans for | | Board appointment | | | balance of skills, experience and | | | | to help steer the Company towards the | theExecutive Committee and the knowledge. achievement of its goals and vision. We were delighted to welcome Nick Varney Leadership Group, including receiving To consider the succession plans for to the Board as an independent Non- an update on the talent pipeline I have concluded that each Director Directors and senior management, executive Director. Nick brings a highly standing for election or re-election at the • Reviewed the terms of reference complementary skill set and experience in takinginto account the leadership, skills, forthcoming AGM is effective in their role andeffectiveness of the Nomination the retail sector which will further enhance expertise and diversity needed to meet andprovides a valuable contribution to the Committee the knowledge, skills and experience of our the challenges and opportunities facing Board. I therefore recommend each Director the Company. Board. The Nomination Committee led the • Reviewed the independence, to you. process for Nick’s appointment and further contribution and time commitment To ensure the process for identifying and Our priority areas for the coming year will be details can be found on page 64. ofeach Director recommending suitable candidates for to continue to focus on succession planning Executive and Non-executive Director • Considered and approved each for both the Board and senior management Succession planning positions delivers the desired outcomes. Director standing for election and and to ensure we have a pipeline of talented The Nomination Committee also monitor re-election at the 2023 AGM and capable people with the right balance succession planning at Board, Executive of skills and all aspects of diversity. Committee and Leadership Group level and continues to recognise the importance of WILLIAM RUCKER developing our people through a diverse CHAIR OF THE NOMINATION COMMITTEE talent pipeline. The Committee received updates on key activities undertaken to further develop the Executive Committee and strengthen the quality of the Leadership Group. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 65 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Nomination Committee report Board diversity • Supplier diversity to ensure inclusive Gender diversity reporting Election and re-elections procurement and an inclusive work As a business we are committed to building a Number of employees at 1 October 2022 With the exception of Nick Varney, who was environment. | diverse and inclusive culture where our people | | | appointed to the Board with effect from 1 July | | --- | --- | --- | --- | | (and our guests) feel welcome and included | Our vision is to be an employer of choice, | | 2022 and will stand for election, all Directors | | for who they are. The Board takes its | with a rich and diverse mix of people who | | will offer themselves for re-election at the | | responsibility in leading this commitment | reflect the societies and communities within | | forthcoming AGM on 24 January 2023. Details | | seriously and applies the same approach to | which we work and serve. Our policy applies | | of each Director serving on the Board at the | | appointing Board members as the Company | to our Board members, all of our employees, | | date of this report are set out on pages 58 to | | does with its employees. Further details are set | our guests and our supply networks and | | 59 and shall be set out to shareholders in the | | out on the following page and in our policy, | reinforces our commitment to equality, | | Notice of Meeting. The Board is of the opinion, | | which can be found on our website: | diversity and inclusion and to having a truly | | as recommended by the Nomination | | www.marstonspubs.co.uk. Recognising the | representative workforce where every | | Committee, that each Director standing for | | value and richness of diverse experience and | member of our team, every guest and every | | election or re-election makes an effective | | | supplier feels respected, valued and able to | Female – 13 | | | backgrounds to the Company, the Committee | | | and valuable contribution to the Company’s | | continues to appoint on merit and ensures that | be their best. | Male – 20 | long-term sustainable success. | its recruitment processes incorporate the Marston’s is a great place to work and we will widest range of suitable candidates from continue to build on that by not tolerating or diverse backgrounds. As at the date of this condoning any kind of inequality or unlawful report, three of Marston’s seven Directors are discrimination. When issues do arise, we will female and two consider themselves to be treat them sensitively and fairly. Furthermore, from an ethnic minority background. On the we are committed to promoting a more Executive Committee, four of the seven inclusive environment to attract and promote members are female, and two consider greater diversity of talent and partnerships. themselves to be from an ethnic A copy of the policy can be found on our minoritybackground. website: www.marstonspubs.co.uk Diversity and inclusion Female – 6,853 At the heart of everything Marston’s stands for Male – 5,294 is our people and, as a business, we want to celebrate, include and work with individuals of all walks, traits and backgrounds. We aim to Senior managers Total employess ensure this commitment is reflected through (Executive Committee and Leadership Group) three areas of focus: • How we attract, nurture and develop ourpeople • How we ensure our guests have the best experience possible 66 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Nomination Committee report Board evaluation The Chair concluded that the Board is A return to face-to-face meetings, re-instating 2022 Board evaluation: outcomes and satisfied with its effectiveness and that of its pre-Board dinners and increasing the time agreed actions As required by the 2018 Corporate Committees. The Non-executive Director with the teams • Greater visibility of KPIs throughout Governance Code, the Company continue to value the NED-only meetings, Action: This year we have welcomed the theyear. undertakes an annual evaluation of the | | with and without the Chair, and further | resumption of face-to-face meetings, Board | | | | --- | --- | --- | --- | --- | | effectiveness and performance of the | | | • Increasing the Board’s awareness of | | | | meetings have already been scheduled as | dinners and increasing the time and direct | | | | Board, its Committees and the Chair. The | | | | stakeholder engagement, particularly | | | part of the 2023 Board forward agenda. | engagement with senior management and | | | | evaluation process helps inform any training | | | | employee views and sentiment. | their teams. In 2023 we expect this trend | and development needs of the Directors, | Update on the 2021 Board evaluation: | | | | | --- | --- | --- | --- | --- | | | | tocontinue with additional pre-Board | • Continuing focus on succession, | | | improve overall effectiveness and identify | outcomes and updates on action taken | | | | | | | dinnersand days in trade baked into | | development, and talent including all | any skill gap that might exist. theforward agenda. aspects of diversity. Increased number of follow-ups on An internal evaluation of the effectiveness strategictopics A focus on more detailed KPIs including • Making more time on the Board agenda of the Board and each of its Committees Action: Each member of the Executive ESGmeasures for informal engagement with the was undertaken this year, led by the Chair Committee contributes a report to every Action: We have agreed KPIs which are Executive Committee and the Leadership and supported by the General Counsel Board pack which highlights key strategies aligned to our strategy, purpose and vision as Group, through Board dinners and days &Company Secretary. All Directors, and provides regular updates. These are set out on page 9. At the end of every period, in trade. regular attendees of meetings, key supported by regular presentations by the the Company produces a management • Areas identified for strategic focus for advisers and the Company Secretary CEO, CFO and the rest of the Executive Team. information pack which measures and reports the Board in the FY2023. were invited to complete an online on the performance of each KPI; both during questionnaire throughthe Company’s Greater insight into the guest focus from • More regular check-ins to consider the period and in aggregate for the year to Board portal, covering all aspects of thenewly restructured Commercial allaspects of Board effectiveness, date. We have agreed ESG targets as set out Board and Committee performance, Marketing team including communication channels on page24 and, in 2023, we are gathering effectiveness and contribution. The Action: Every formal meeting of the Executive and quality and timing of Board relevant information from our business Non-executive Directors also met Committee includes a presentation by the reports. ecosystems with a view to including these withoutthe Chair being present to Director of Insight in the Commercial Marketing measures in the information pack. | discusshis performance and the | Team and the minutes of each meeting are | | | --- | --- | --- | | conclusions werefed back to the | circulated to the Board for information. The | Broadening the composition of the Board to | | Chairbythe Senior Independent | Commercial Marketing Director also submits a | support the new CEO and CFO | | Director.TheChair then summarised | written report for each Board meeting and is | Action: As set out on page 56, the | | thecomments for consideration and | regularly invited to present. Our Reputation | composition of the Board was strengthened | | discussion by the Board. Details of the | score is a KPI and measurements are included | by the appointment of Nick Varney. | | conclusions, togetherwith an update on | in the monthly information pack. | | the 2021 recommendations, are set out further onthis page. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 67 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Audit, risk and internal control Fair, balanced and understandable Risks and internal controls The Risk & Compliance Committee, chaired by the General Counsel & Company Throughout the year, the Board receives The Audit Committee receives regular and Secretary, is responsible for monitoring all updates on the performance of the business detailed updates on the Company’s risks, areas of legal and regulatory compliance and key challenges, opportunities and risks. both current and emerging, and the risk across the business and for approving Group During the year-end process, comprehensive management systems that are in place to policies. Comprising a cross-functional group reviews and validations are undertaken by monitor and manage its risks. These are of senior representatives from across the the Company Secretariat and Finance presented by the Director of Corporate Risk business, the Risk & Compliance Committee teams, with support from teams across the who attends each Audit Committee meeting considers the impact of any emerging business to ensure that the information to provide the Non-executive Directors with legislation on the business and the provided in the Annual Report and Accounts, greater transparency and deepen their effectiveness of our internal controls and when taken as a whole, is fair, balanced and understanding of the Company’s risk compliance processes as well as receiving understandable. Drafts of each section of management systems and controls. The regular updates on those areas identified as the Annual Report and Accounts are Board as a whole considers the effectiveness our key principal or emerging risks. The Risk & reviewed for consistency and alignment of the risk management and internal control Compliance Committee also nominates and across the whole document, and linkage systems through a thorough assessment of either oversees or undertakes ‘deep dives’ tostrategy, business model and risks. The the risks facing the Group that could threaten into areas of emerging operational risk with accuracy of the content is then verified by its business model or future performance. To the objective of testing the Company’s supporting evidence before presentation supplement these considerations, the Board resilience and control systems. The quarterly tothe Board, in good time for consideration receives reports and updates from the Risk & meetings also help inform the Internal Audit ahead of final approval. The external Auditor Compliance Committee along with ongoing plan managed by the Director of Corporate provides reassurance through their review updates from the Executive Committee and Risk and any compliance testing aimed at processes which are focused on consistency senior management. No material failings in ensuring the Company is discharging its between the narrative and numbers, and an the Group’s internal controls were noted obligations with regard to any relevant assessment of whether the description of although a number of improvements were legislation as well as its own policies and business performance is consistent with the identified which management is now in the procedures. Annual updates on the activities understanding gained through their audit process of addressing. Improvements include of the Risk & Compliance Committee are procedures, to present a fair and balanced reviewing the Group’s Financial Reporting provided to theBoard. report on the period. Controls and Processes Programme for completeness and priority of financial year More details on the Group’s approach to Having reviewed the processes and 2023 workstreams to improve the quality and riskmanagement and internal controls are heardfrom the Audit Committee about the documentation of controls. provided in the Strategic Report on pages discussions with the external Auditor, the 43to 55. Board is satisfied that the Annual Report and Accounts taken as a whole presents a fair, balanced and understandable representation of the Company’s position and performance, together with its strategy and business model. 68 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Audit Committee report The ongoing disruption further illustrates the ### DEAR SHAREHOLDER, need to embed the threat of such risks into Key activities during the reportingyear I am pleased to present the Audit Committee the Company’s risk management framework, • Reviewed the Interim results and full year report for the period ended 1 October 2022. and I remain reassured by the Company’s accounts, including the significant The report outlines how the Audit Committee response to the pandemic and the resilience judgements and estimates, going concern discharged its duties over the past year and it has since shown. The Company’s response statement and viability statement and the key areas and risks it considered in to the pandemic and business continuity recommended approval to the Board. doingso. more generally forms part of the Company’s | • Received a report from the Estates | | The Committee has continued to play | Internal Audit plan for FY 2022/23. I continue | | --- | --- | --- | --- | | | Director on the valuation of the estate, | acrucial role in assessing and having | to have regular meeting outside of the Audit | | | considered and reviewed the valuation | stewardship of the Group’s financial | Committee meetings with the Director of | | | including the methodology adopted by | reporting procedures and has continued | Corporate Risk and I am confident in his | | | the independent valuer. | tomonitor the implementation and | capability and approach. | effectiveness of the internal control and risk • Considered and reviewed the use of Another key focus for the Committee this management framework. Following this Our responsibilities alternative performance measures. year has been considering the review of the year’s internal evaluation, I am pleased to The main role of the Audit Committee is estate valuation, noting the impact that the • Reviewed the Company’s principal and confirm that I consider the Committee to assist the Board in discharging its pandemic and macro conditions continue to emerging risks, together with the continues to operate effectively with responsibilities by reviewing and have on comparables. I am satisfied that framework for managing, mitigating and appropriate scrutiny and no significant monitoring the integrity of the Annual management has undertaken a thorough testing those risks. matters were raised as part of the evaluation. Report and Accounts and Interim process before concluding on the outcomes • Reviewed and approved the annual In the first half-year, the Company was of the valuation process. results, paying particular attention to Internal Audit plan for financial year impacted by the Omicron variant and the significant judgements, monitoring the Finally, the Committee is cognisant of the 2022/23. Committee is also mindful of the ongoing effectiveness of internal and external proposals for the reform of corporate uncertainty posed by world events, such as controls and risk management systems • Assessed the effectiveness of the reporting and audit regime in the United the war in Ukraine and the cost-of-living crisis. and reviewing the external Auditor’s Company’s Whistleblowing Policy – Kingdom. As part of the Company’s Internal As such, I have maintained regular independence, objectivity and ‘Speak Up’. Audit plan, management is undertaking an conversations with the Board Chair, the CFO effectiveness. The Committee reports to assessment of the maturity of the Group’s • Reviewed the results of the annual and the external Auditor partner concerning the Board on its activities and makes internal financial controls and reporting evaluation of the effectiveness of the the Company’s financial position and any recommendations, all of which have environment, the results of which will be Committee and recommended required courses of action. The Committee been accepted by the Board during reviewed by the Committee. In addition, the improvements. has reviewed and is supportive of the the period under review. Committee received various updates on the • Received updates on and approved the statements, judgements and estimates proposed reforms from the external Auditor Attendees Statutory Pubs Code compliance report. management has made in arriving at the and, going forward, regular updates are conclusions set out in this report. In particular, The Director of Corporate Risk and the • Reviewed the external Auditor’s planned to enable the Committee to assess I would draw your attention to the going external Auditor attend each meeting. independence, objectivity and the potential impact of the reforms on the concern and viability statements and the The Board Chair, CEO and CFO are effectiveness. future work of the Committee. significant financial judgements, which are usually invited to attend all or part of • Reviewed the Non-Audit Services Policy set out on pages 70 and 71. MATTHEW ROBERTS the Committee’s meetings. and the external Auditor’s non-audit fees CHAIR OF THE AUDIT COMMITTEE (of which there were none in the year). MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 69 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Audit Committee report External Audit During the year the Committee also (together with any actions agreed with considered the independence and objectivity management) is presented to the Audit Statutory Pubs Code KPMG LLP was appointed as the external | | of the external Auditor, which was confirmed | Committee on a regular basis. The Committee | | | --- | --- | --- | --- | | Auditor of the Company in 2020 and the | | | The Audit Committee has been updated | | | by an independence letter from KPMG setting | reviews the effectiveness of the Internal Audit | | | Company’s lead Audit Partner is John Leech | | | during the year on matters relating to the | | | out their safeguarding procedures alongside | function and assesses the quality of Internal | | | who also was appointed in 2020. | | | Pubs Code and, in accordance with | | | regulatory requirements and their professional | Audit reports, along with management’s | | those regulations, the Chair of the Audit Marston’s relationship with the external and ethical standards. response, on an ongoing basis. During the Committee has approved the annual | Auditor is managed through their | | financial year 2022/23, it has been agreed | | | --- | --- | --- | --- | | | Taking all of the above matters into account, | | compliance report that was submitted to | | attendance at each Audit Committee | | that the reports will include a tracker so that | | | | the Committee concluded that the audit | | the Pubs Code Adjudicator (PCA) by the | | together with regular meetings with the | | the Audit Committee may review and assess | | | | process, independence and quality of the | | Company’s Code Compliance Officer | | Chairof the Audit Committee (both with and | | the timeliness of the completion of | | | | external Auditor is satisfactory, with the | | for the reporting period 1 April 2021 – | | without management present) providing | | recommended or agreed actions. | | | | appropriate level of independence and | | 31March 2022 (PCA Period). | sufficient opportunity to interrogate and objectivity, and therefore recommend their challenge key areas and assess their Going concern and viability During the PCA Period, Marston’s was reappointment to shareholders. independence. The Audit Committee notsubject to any investigations, statements reviewed the external Auditor’s effectiveness No non-audit services were provided this enforcements or representations of unfair Trading in the first half of the year was in the following ways: year by the external Auditor. business practices by the PCA. During impacted by the emergence of the Omicron the PCA Period, seven referrals were • Feedback from the members of the variant and the Committee has continued Internal Audit function made to the PCA, six of which were AuditCommittee and regular attendees tomonitor and review management’s withdrawn. As disclosed last year, the Company’s Audit of Committee meetings as part of the assessment of the potential impact. In function has been reorganised into a more The Group continues to work within the overall review of the effectiveness of the particular, it was necessary during the year efficient structure to provide assurance of Pubs Code regulations and regularly Audit Committee. toseek amendments to banking financial theadequacy and effectiveness of internal reviews its internal processes. During the covenants across the lending banks and • Feedback from the CFO and her controls, risk management and compliance PCA Period, theCompany launched a private placement provider, due to the trading seniorteam who monitor the external across the Group. The Company’s Internal new e-learning module for all internal restrictions caused by the impact of the Auditor’s performance, behaviour and Audit function is led by the Director of and external stakeholders to help ensure Omicron variant. The Committee noted that effectiveness during the exercise of Corporate Risk. In order to safeguard the best practice and the delivery of the covenant amendments were granted, and itsduties. independence of the Internal Audit function, compliance-based training in a the amended covenant tests were met. The • Scrutinising all reports and audit plans the Corporate Risk Director regularly meets consistent and comprehensive way. Committee further noted that no securitisation submitted by the external Auditor. with the Chair of Committee and the external waivers or amendments were required. The PCA compliance report can Auditor (and any other member of the • The annual review conducted by the beaccessed on our website: The Committee has continued to monitor Committee as required) without the Executive Director of Corporate Risk and presented to www.marstonspubs.co.uk/responsibility/ and review management’s assessment of the Directors or management being present. the Committee at the November meeting. statutory-pubs-code/ ongoing impact of COVID-19, the Group’s The Committee has reviewed and approved As a result of the ongoing review process, financial position and exposure to principal the Internal Audit Plan for 2022/23 having management and the external Auditor risks, including the cost-of-living crisis; regard to the Group’s business risks and agreed some improvements to the year-end specifically with regard to the Group’s ability strategic objectives. Internal Audit findings are process with the objective of making it more to operate as a going concern for the next presented to the relevant manager and/or risk efficient and effective and, where possible, twelve months and meet its liabilities as they owner and the General Counsel & Company mitigating the proposed cost increases. fall due over the next three years. Secretary for review. An Internal Audit report 70 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Audit Committee report The Committee has considered the waivers and covenant amendments • Retirement benefits – actuarial assumptions capital gap analysis to determine whether an methodology of management’s projections securedand the return to pre-pandemic levels in respect of the defined benefit pension impairment of the asset values is required. The and forecasts, noting that they assume of trading during the current financial year, plan, which include discount rates, rates of Committee noted that the analysis showed moderate sales price increases, operational the Directors expect to be able to secure the increase in pensions, inflation rates and life that there is sufficient headroom between the costs rising broadly in line with inflation and future covenant amendments required, albeit expectancies total asset value and enterprise value and is increased borrowing costs. The Committee this cannot be guaranteed. Accordingly, comfortable with management’s conclusion • Financial instruments - valuation of further notes that management have also thefinancial statements continue to be that, as such, no impairment is required. derivative financial instruments considered a severe but plausible downside prepared on the going concern basis but scenario, incorporating reduced visits as a withmaterial uncertainty arising from the Estate valuation CMBC impairment review result of the cost-of-living crisis. current macroeconomic environment. Full As noted and approved by the Committee in The Committee notes that CMBC operates details areincluded in Note 1 to the The conclusion of this assessment was that 2021, the Group has moved to annual external inasector that has been disproportionately FinancialStatements. theDirectors are satisfied that the Group has valuations of its properties, with approximately impacted by COVID-19 and, as such, an adequate liquidity to withstand such a severe Accordingly, the Committee has noted that one third of the estate being inspected each impairment review was undertaken by but plausible downside scenario. However, the Group’s financial statements have been year, on a rotational basis. Following a tender management under IAS 36 ‘Impairment of the Group has Debt Cover and Interest Cover prepared on a going concern basis but with process overseen by the Committee, Christie assets’. The recoverable amount of the Group’s covenants across its banking group and material uncertainty arising from the current & Co were appointed and undertook an investment was estimated on a value in use private placement provider and Liquidity and macroeconomic environment. external valuation in July 2022. The Committee basis. It was reported to the Committee Unencumbered Asset Cover covenants only met on several occasions to consider the thatthis was based on forecast cash flows with its private placement provider; the Debt Key estimates and significant financial valuation and both the external Auditor and approved by the board of CMBC, which were Cover, Interest Cover and Unencumbered judgements the Chair of the Audit Committee met with reviewed by external auditors. The impairment | Asset Cover covenants are forecast to be | | | Christie & Co to consider their methodology | | --- | --- | --- | --- | | | The following significant financial | review undertaken indicated there was | | | breached during FY2023 starting at the | | | and approach. The Committee noted that the | | | judgementsand estimates were considered | sufficient headroom over the carrying amount. | | | 31December 2022 test and will require | | | valuer’s assumptions around fair maintainable | | | bythe Committee in relation to the reporting | Management concluded that no reasonably | | | covenant amendments. In respect of the | | | trade and valuation multiples were towards | | | year. TheCommittee notes that under IFRS | possible change in the assumptions used | | | Liquidity covenant associated with the | | | the lower end of management’s expectations | | | management is required to make estimates | would have resulted in an impairment and the | | | Group’s £40million private placement | | | but that the multiples disclosed, by both the | | | and assumptions that affect the application | Committee is supportive of management’s | | | borrowings, forthe October 2022 fiscal month, | | | Group’s peers in their valuations and recent | | | ofpolicies and reported amounts. Estimates | approach and conclusions. As such the | | | there was atechnical default, for which | | | comparable transactions, were within an | | | and judgements made by management are | Committee notes the recoverable amount | | | waivers have been secured. The Group also | | | acceptable range and the Committee | | | continually evaluated by the Committee. | forthe Group’s investment in CMBC is not | | | obtained prospective waivers from its private | | | accepted the valuation. The Committee notes | | | TheGroup’s key assumptions and significant | considered to involve key assumptions or | | | placement provider for the November | | | that the carrying value of the Group’s estate is | | | judgements considered by the Committee | significant judgements. | | | andDecember 2022 fiscal month Liquidity | | | now £2.1 billion and as a result of the valuation | areset out below: Market Capitalisation and leasehold impairment review, there is an covenants and further amendments to this • Non-underlying items – determination of The Committee notes that restricted trading effective freehold impairment reversal of Liquidity covenant will be required during the items to be classified as non-underlying during the last few financial years, including £88.4 million and a leasehold impairment year. These waivers and amendments are the impact of COVID-19 and cost-of-living reversal of £5.0 million, giving a £93.4 million required due to the impact of COVID-19 and • Property, plant, and equipment – valuation crisis, has negatively impacted the Company’s increase in net book value. Further details are the Omicron variant in H1. of effective freehold land and buildings share price, and the share price of its industry set out on page 18. The Group will continue to have regular peers, resulting in a gap between the communication with its lenders throughout Company’s market capitalisation and asset thisperiod and, on the basis of the previous values. Management has performed a market MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 71 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Directors’ remuneration report Overview of performance in 2021/22 Performance outcomes for the year The Committee also agreed that, in the first full year of our new strategy, it was important and business context Annual bonus 2021/22 to make the equivalent adjustments to the The first half of the reporting year was Stretching targets were set at the start of senior management team bonus targets. To impacted by the trading restrictions and 2021/22, amidst continuing supply and labour balance this use of positive discretion, the consumer confidence as a consequence of challenges and growing concerns over rising quantum available under the financial the Omicron variant of COVID-19. Following inflation, energy costs and interest rates. measures applying to 70% of the bonus was the launch of our ‘Pubs to be proud of’ vision, Targets were based on a balanced mix of reduced by four twelfths. The 30% applying to at the start of the 2021/22 FY, our people financial (EBITDA and FCF) and strategic the strategic measures was unchanged as the worked incredibly hard to deliver our core measures (performance vs Peach market targets remained unmodified and were pub and corporate goals. tracker, Reputation scores and employee assessed over the full 12 months. As a result, engagement). | Total revenue for the reporting year | | the bonus opportunity for the year was | | --- | --- | --- | | increased by 99% to £799.6 million (2021: | During the year, the Remuneration | reduced from 100% of salary to 76.66% | | £401.7 million), principally reflecting our | Committee reviewed the operation of the | ofsalary. | ### DEAR SHAREHOLDER, recovery from a period severely impacted Peach market tracker, which provides sales The adjustments to the bonus were aligned I am pleased to present our report for bythe global pandemic and the significant data for the UK eating and drinking out across the wider workforce and the original theperiod ended 1 October 2022 which restrictions on pub trading during the prior market. Following that review, at the March and adjusted target ranges can be found on setsout the details of our new Directors’ year. We have seen high levels of guest 2022 meeting, the Committee replaced the p a g e 8 7. Remuneration Policy, being put to satisfaction and standards, delivered by our Peach market tracker with a Group sales shareholders at the 2023 AGM, Directors’ measure with equivalently stretching targets. During the remainder of the year, our business engaged workforce. The performance of the remuneration in respect of 2021/22 and As part of a balanced scorecard, Group was impacted by continuing supply chain business supports the progress against our howwe intend to operate the Remuneration sales better reflects overall financial challenges, volatility in our economy, rising strategic goals and the transformation of our Policy in 2022/23. performance. energy costs and the cost-of-living crisis. business during the reporting year. Performance against our financial measures Given the significant disruption to trading Having made a strong start to the year, with (Group sales, EBITDA and FCF) did not reach and margins in the reporting year, and the promising levels of Christmas bookings, the threshold and no bonus is payable against potential for continuing uncertainty, the business was heavily impacted by the trading those measures. However, we have worked Board has agreed that it would not be restrictions imposed as a consequence of the hard to raise standards, engage with our appropriate to propose a dividend in respect Omicron variant in December 2021. It people and to consistently improve guest of FY 2021/22. Our immediate priority is to became quickly apparent that the EBITDA experiences. We were delighted to see our reduce debt, but the Board remains and cashflow performance conditions, which employee engagement score achieve 7.8 at cognisant of the importance of dividends to had very recently been set, had been the end of the reporting year, surpassing our many of our shareholders and we continue to rendered unachievable. Recognising the threshold target and very close to our keep our dividend policy under review. need to maintain motivation within our pub, ambitious target of 8.0. Despite a challenging operational and support teams, the year for our people, they have remained fully Committee concluded that it would be in engaged, which is a notable achievement shareholders’ interests if the targets for both given the high turnover rate seen in our sector. financial measures were adjusted to exclude the negative impact of Omicron by removing trading periods 1–4. 72 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CORPORATE GOVERNANCE REPORT CONTINUED # Directors' remuneration report Our Reputation score achieved 73¹, reflecting the efforts of our people in consistently delivering great guest experiences, ensuring our guests return time and time again, giving us confidence in growing our future sales performance. A full breakdown of the objectives and our performance against them is contained in this report. Overall, based on the achievement of these performance measures, the CEO and CFO will receive a bonus of 4% of maximum. When reviewing the formulaic outcome of the bonus against the targets, the Committee took into account: - Wider business performance – an improvement in business performance and a positive year of change, with increased standards and great guest experiences, and an increase in our net asset value. - The wider workforce experience – our Group scheme earned a pay-out of between 22.5% and 25% of maximum (higher than that of the Executive Directors), ensuring that our people have been recognised for their efforts during the year to raise standards and improve the guest experience. Based on the considerations set out above, the Committee is comfortable that the formulaic outcome of the bonus is appropriate and so no discretion has been applied on the adjusted formulaic outcome. # LTIP 2019/20 award vesting The three-year performance period for the LTIP award made in December 2019 ended on 1 October 2022. Performance was based 40% on underlying Earnings Per Share (EPS), 40% on Net Cash Flow (NCF) and 20% on Total Shareholder Return (TSR) versus the companies in the FTSE 250 Index (excluding Investment Trusts). Due to the impact of the pandemic, the EPS and TSR elements did not reach the threshold performance requirement. However, NCF achieved maximum performance. The Committee discussed the formulaic outcome of the LTIP at length. We considered the impact of the disposal of the beer company into the CMBC on the NCF outcome and details of the Committee's considerations in this regard are set out later in this report on page 88. In addition, the awards were granted prior to the onset of COVID-19 (i.e., there was no potential for COVID-19 related windfall gains). As a result, the Committee is comfortable that there has been a clear and strong link between reward and performance and that discretion was not required to adjust the incentive outcome. Shares received by the Executives on vesting will be held for a further two years before they can be sold, unless they are required to continue to be held to build towards the 200% of salary guidance level. The Committee is comfortable that actions taken on pay during the year across the Company were appropriate and balanced the interests of all stakeholders and that the Remuneration Policy operated as intended. # Directors' Remuneration Policy Our current Policy was approved at our 2020 AGM and is due for renewal at our 2023 AGM. Our current Policy has served the Company well over the past three years, enabling us to be flexible in the payments to Executive Directors and to recruit a new CEO and CFO, and it has provided a good overall link between pay and performance. On this basis, and having explored alternative incentive mechanisms, including Restricted Shares, our review concluded that only a few minor amendments were necessary to the structure, mainly relating to simplification and alignment to market best practice. In addition to looking at structure, the Remuneration Committee reviewed the market competitiveness of the packages and the incentive opportunity, as we seek to execute our strategic growth plans and corporate goals towards achieving our ambition of £1 billion of sales. We have made a modest increase to the maximum annual bonus opportunity available under the Policy, from 100% to 25% of salary. However, whilst stretching targets will still be set for the 2022/23 FY bonus, recognising the need for restraint at the current time, we will continue to operate the bonus at a 100% maximum level, for at least the first year. There are no proposed changes to the LTIP maximum normal grant limit of 50% of base salary under the current Policy. The change set out above represents an aligned approach between the Executive Committee and Leadership Group. To further balance the increase to potential performance-based remuneration, we have strengthened the deferral under the annual bonus and the post-employment shareholding requirements (which will apply from FY 2022/23) even though the increase to policy headcount for the bonus will not be applied immediately. # Implementation of the Remuneration Policy in 2022/23 The Committee considered how remuneration should be implemented for 2022/23. Part of this process was reviewing current practice against both market and best practice, our Group reward principles and pay ratios, the current economic situation and responses to our shareholder consultation. The Committee recognises the need for restraint at the current time and has agreed that no changes will be made to the operation of our incentive schemes, for at least the first year. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Directors’ remuneration report | The key decisions taken for 2022/23 included: | LTIP for 2022/23 | Other considerations during the year | The achievement of our strategic objectives is | | --- | --- | --- | --- | | | There were no proposed changes to the | | dependent upon the quality of our people. | | Base salary and fees effective | | Executive Director pay and the wider | | | | maximum grant limit of 150% of base salary | | The engagement and enablement of our | | 1October2022 | | workforce | | | | under the current policy, recognising that this | | teams remains front and centre of our plans. | | During the year, the Committee reviewed | | We aim to operate with fairness, integrity, | | | | provided headroom above the currently | | The Committee has engaged directly with | | thesalary increases for the wider salaried | | and transparency across the business. Salary, | | | | applied grant level of 125% of salary. For the | | employees to explain the alignment of pay | | workforce taking into account high inflation | | benefits and performance related rewards | | | | next policy period, recognising that stretch | | across the Group (including the Directors’ | | and the cost of living and also the need to | | provided to employees are taken into | | | | targets would be set in line with the longer | | Remuneration Policy). | | control our cost base. As a result of the review, | | account when setting the policy for | | term strategy to 2025 and beyond, we had the majority of the wider salaried workforce Executive Directors’ remuneration. An in-person session was originally planned intended to increase the grant level from 125% | received an increase of 4% of salary. In | | | for19 September 2022 but, due to the Bank | | --- | --- | --- | --- | | | of salary to 150% for the CEO combined with | Salary increases across the workforce were | | | addition, most salaried employees were | | | Holiday for the Queen’s funeral, the session | | | challenging and stretching performance | reviewed during the year, taking into account | | | eligible to receive a one-off payment of | | | was held virtually in October 2022. The | | | targets to drive top-end performance. | inflation. For the majority of our pub teams, | | | upto£750, to help with the sharp increase | | | Directors’ Remuneration Policy and its | their remuneration is set by statute rather than tothe cost of living and energy costs. However, should the current weakness in the implementation were not raised as a material the market. However, following the statutory Therefore, withan increase of 4% applied share price, at the time of writing, persist, we issue in the discussion during the engagement increases applied in April 2022 to the National tothe majority of the salaried workforce, plus have decided that, for the FY 2022/23 award, and so no amendments to the Remuneration Minimum Wage (NMW), the Company the additional payments, the Committee was we will reduce the grant level for the CEO Policy or its proposed implementation were applied additional increases that ensured comfortable with a lower increase of 3% for from 150% back to 125% of salary, with the required. Positive comments were made on ourteam members are paid more than the the Executive Directors. same proportionate scale back for the CFO, the bonus opportunities for the workforce, statutory minimum, regardless of their age. whose grant level would reduce from 125% to particularly on the alignment of performance Non-executive Director and Chair’s fees 104%. Despite the scale-back, stretch targets The Committee also has oversight of how measures and understanding of their have been increased by 3% for 2022/23. will still be set. bonus schemes throughout the organisation contribution to the Company’s performance. Annual bonus for 2022/23 align, and of the performance measures, ROCE has been introduced as a performance The annual bonus opportunity for Executive targets and outturn of each scheme. The measure. ROCE, alongside the other measures Directors will be 100% of salary, in line with the amendments made to the 2021/22 bonus previously included (NCF, TSR and PBT), will previous year. Performance measures remain measures and the pay-out under the bonus provide a rounded assessment of our overall unchanged and are aligned to our strategic were aligned across the workforce. profitability and shareholder return. objectives. In line with the new Remuneration Policy, more stringent deferral requirements will apply and so, one third of any bonus paid will be deferred into shares for three years. 74 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Directors’ remuneration report Shareholder engagement Our responsibilities • When determining remuneration policy • Continued to monitor the impact of During 2022, we engaged with our largest | | | | and practices, considering the Code | theCOVID-19 pandemic on employee | | --- | --- | --- | --- | --- | | investors as well as Institutional Shareholder | • Determining the framework and policy | | | | | | | | requirements for clarity, simplicity, risk | wellbeing, reward and motivation as the | | Services (ISS), Investment Association (IA) and | | for Executive Directors’ remuneration. | | | | | | | mitigation, predictability, proportionality | business reopened. | Glass Lewis, to understand their views on our • Within that framework, setting the and alignment to culture. • 2022 bonus and 2019/20 LTIP award proposed new Policy and the proposed remuneration for the Executive Directors • To consider remuneration policy in the outturns, as outlined above. implementation in 2022/23. Overall, the and other members of the Executive context of the wider workforce benefit feedback received was supportive for the new • Consideration of targets for Operational, Committee (including the General structures, pension provision and policy, although there was encouragement for Group, senior management and Counsel & Company Secretary). remuneration trends across the Group restraint on any quantum increases at the Executive Director bonus schemes. • Setting the Chair’s remuneration. andchallenge, when necessary, current time. The Committee took these views | | | | toensurealignment. | • Consideration of LTIP grants. | | --- | --- | --- | --- | --- | | into account when finalising the policy | • Establishing remuneration schemes | | | | | proposals and operation for FY 2022/23. | | thatpromote long-term shareholdings | | • Review of Executive Directors’ and | Key activities of the Committee byExecutive Directors, that support senior management shareholdings in We welcome and encourage all inrespect of the year alignment with long-term shareholder the Company, in the context of feedbackfrom our shareholders as it interests. shareholding guidelines. • Reviewed the Remuneration Policy helpsinform our thinking on remuneration ahead of the 2023 AGM. | mattersand we hope we can rely on your | • Designing remuneration policies and | | | | • CEO pay ratio reporting. | | --- | --- | --- | --- | --- | --- | | continuing support. If you would like to | | practices to support strategy and | • Consulted with investors on the | | | | contact me directly to discuss any aspect | | promote long-term sustainable success, | | Remuneration Policy and the proposed | | | ofour Policy or this report, then please email | | with remuneration aligned to the Group’s | | implementation of the Policy in 2022/23. | | | me at remunerationchair@marstons.co.uk. | | purpose and values and linked to the | | | | • Engaged with the wider workforce on Iwill be available at the AGM (on 24 January successful delivery of our long-term the alignment between Executive pay 2023) to answer your questions. Alternatively, strategy. Choosing appropriate and the wider workforce. if you are not able to attend or, if any performance measures and targets for prevailing restrictions at the time prevent the annual and long-term incentive awards, • Consideration of pay review proposals AGM frombeing held as a physical meeting, exercising independent judgement and for the Chair, senior management and pleasedo send your questions to the discretion when considering awards and the wider workforce. emailaddress above. pay-outs, taking account of Group and individual performance, and wider OCTAVIA MORLEY circumstances. CHAIR OF THE REMUNERATION COMMITTEE MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 75 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CORPORATE GOVERNANCE REPORT CONTINUED # Directors' remuneration report # Attendees The Committee met three times during 2021/22. The names of each Committee member and meeting attendance are shown below. For further details on Committee membership and the membership of other Board Committees, see pages 58 and 59. | Committee member | Meeting attendance | | --- | --- | | Octavia Morley (Chair) | 3/3 | | Bridget Lea | 3/3 | | Matthew Roberts | 3/3 | | Nick Varney^{1} | 1/1 | $^{1}$ Nick Varney was appointed to the Board and the Remuneration Committee with effect from 1 July 2022. The Committee receives advice from a number of different sources. This helps to inform decision-making and ensures the Committee is aware of pay and conditions in the Group as a whole, and conditions in the wider market. Andrew Andrea, CEO, attended the majority of meetings during the year to provide advice in respect of the remuneration of senior management. HR Director and Deputy Company Secretary also attend each meeting and provide advice to the Committee. No person is in attendance for any discussions regarding their own remuneration. Karn Ferry were appointed by the Committee following a review in 2022 and attend meetings when required. Karn Ferry provided advice on the Remuneration Policy and supported management with technical matters relating to the execution of the Committee's decisions. Karn Ferry received fees amounting to £35,762 during the year in respect of advice given to the Committee. Karn Ferry is a member of the Remuneration Consultants Group and, as such, voluntarily operates under its Code of Conduct in relation to executive remuneration consulting in the UK. The Committee is satisfied that the advice received was objective and independent. Prior to the appointment of Karn Ferry, Deloitte received fees amounting to £5,200 during the reporting year, in respect of advice given to the Committee. # Annual General Meeting voting outcomes The following table summarises the details of votes cast for the Directors' Remuneration Policy and the Directors' remuneration report at the 2020 and 2022 AGM, along with the number of votes withheld. The Committee will continue to consider the views of, and feedback from, shareholders when determining and reporting on remuneration arrangements. | | Votes For | % | Votes Against | % | Votes Total | Votes Withheld | | --- | --- | --- | --- | --- | --- | --- | | Directors' remuneration report 2022 AGM | 81,110,385 | 95.90% | 3,465,338 | 4.10% | 84,575,723 | 95,575 | | Directors' Remuneration Policy 2020 AGM | 89,792,873 | 86.05% | 4,551,016 | 3.95% | 104,343,889 | 31,691 | 76 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Remuneration summary Performance snapshot Implementation for 2022/23 Annual bonus performance Measure Performance Achievement (% of max) Base Salary • Andrew Andrea – £620,626 (3% increase) • Hayleigh Lupino – £397,838 (3% increase) Group EBITDA 30% 0% Benefits No change Group Free cash flow 40% 0% Pension 3% of salary Group Sales 10% 0% Bonus • Maximum opportunity: 100% of salary Reputation score 10% 100% • Subject to EBITDA, FCF, sales, reputation score and employee Employee engagement 10% 40% engagement score objectives • One third of any bonus earned will be deferred for three years Long-term incentive performance LTIP • Maximum opportunity: Measure Performance Achievement (% of max) − Andrew Andrea –125% of salary − Hayleigh Lupino – 104% of salary Underlying EPS 40% 0% • Awards subject to NCF, TSR, PBT and ROCE • 2-year post-vesting holding period applies Net cash flow 40% 100% Shareholding guidelines • In employment: 200% of salary Relative TSR vs FTSE250 (excluding Investment Trusts) 20% 0% • Post-employment: 200% of salary for 2 years Total remuneration Incentive timelimes Total remuneration Year 1 Year 2 Year 3 Year 4 Year 5 Annual bonus Long-term Incentive plan £900,000 £800,000 Key: Performance period Deferral/holding period £700,000 £600,000 £500,000 £400,000 £300,000 £200,000 £100,000 £0 | | 2022 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | | Andrew Andrea | | Hayleigh Lupino | | Salary Benefits Pension Other | | | Annual Bonus Long-term incentives | | MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 77 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Remuneration Policy This report has been prepared in accordance with the provisions of the Companies Act 2006, − The policy regarding dividend equivalents has been updated to reflect market practice. the Large and Medium Sized Companies and Groups (Accounts and Reports) (Amendment) Rather than dividend equivalents only being awarded from the end of the performance Regulations 2008 and the subsequent amendments, and the Financial Conduct Authority period until the date of release, the participants may receive dividend equivalents equal (FCA) Listing Rules. In addition, the report has been prepared on a ‘comply or explain’ basis to the value of dividends that would have been received on the shares over the vesting with regard to the UK Corporate Governance Code 2018. period (and holding period if structured as a nil-cost option). The Remuneration Policy described in this section is intended to apply for three years and will • Shareholding requirement: be applicable from the date of approval by shareholders at the Company’s 2023 AGM. − The current Policy requires Executive Directors to hold 100% of all vested shares from The key changes to the Policy are set out below. theLTIP, net of tax, until the guideline is met (deferred bonus shares do not need to be retained). Under the proposed Policy, Executive Directors will be required to continue to • Pension: hold 50% of deferred shares, as well as vested LTIP awards until the guideline is achieved. − All Executive Directors must have a pension contribution in line with the wider workforce This brings this feature in line with normal market practice and provides a better balance (currently 3% of salary) rather than just new hires. This element is purely a change to the between a cash payment and the retention of shares. Policy wording, as the current Executive Directors already comply. − The current Policy for post-employment shareholding requires 200% of salary to be held • Annual bonus: for one year and 100% of salary for an additional year. The revised Policy states that the full 200% of salary must be held for 2 years post-cessation, in line with IA guidelines and − The Remuneration Committee reviewed the market competitiveness of the packages market best practice. and the incentive opportunities, as we seek to execute our strategic growth plans and corporate goals towards achieving our ambition of £1bn of sales. As a result, we have • Other Policy elements: made a modest increase to the maximum bonus opportunity available under the Policy, − The recruitment and leaver policies have been simplified and aligned to normal market from 100% to 125% of salary. practice, and to remove the ability for the bonus earned for the year of departure and − Currently, bonus payments up to 40% of the maximum are payable in cash and those in the preceding year to be paid wholly in cash (with no deferral). excess of 40% of maximum are deferred into shares for three years. Under the proposed Policy, one third of any bonus earned will be deferred for three years. The de minimis Determining the Remuneration Policy requirement for the bonus deferral has also been removed. This means that part of the The Committee is responsible for the development, implementation, and review of the bonus will always be deferred, which will help the Executive Directors (and Executive Directors’ Remuneration Policy. In addressing this responsibility, the Committee works Committee to whom this will also apply) build up a shareholding in the Company quicker withmanagement and external advisers to develop proposals and recommendations. and aligns with market practice. TheCommittee considers the source of information presented to it, takes care to understand − The pay-out schedule for the financial and non-financial measures will be aligned with the detail and ensures that independent judgement is exercised when making decisions. 20% of maximum paying out at threshold (where the nature of the performance metric allows such an approach). • Long-term incentive plan (LTIP): − The current Policy states that the LTIP will be based on financial measures and/or share price growth related measures, aligned to the Group’s long-term strategy. The proposed Policy provides greater flexibility in the Policy to allow the Remuneration Committee to use other measures in the LTIP that best align to Company strategy e.g., ESG and other non-financial strategic measures. Financial or shareholder return targets will apply to a majority of the award. 78 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Remuneration Policy When setting the Remuneration Policy, the Committee considered the Company’s strategic The pay alignment across the business objectives over both the short and the long term, the external market, market best practice The Company aims to provide a remuneration package that is market competitive, complies and pay across the Group. The Policy has been tested against the six factors listed in Provision with any statutory requirements and is applied fairly and equitably across the wider employee 40 of the UK Corporate Governance Code: population. Where remuneration is not determined by statutory regulation, the Company • Clarity – the Policy is as clear as possible and is described in straightforward concise terms operates the same core principles as it does for Executive Directors, namely: to shareholders and our people in this report. • We remunerate people in a manner that allows for stability of the business and the • Simplicity – remuneration structures are as simple as possible and market typical, whilst at opportunity for sustainable long-term growth. the same time incorporating the necessary structural features to ensure a strong alignment • We seek to remunerate fairly and consistently for each role with due regard to the to performance and strategy, minimising the risk of rewarding failure. marketplace, internal consistency and the Group’s ability to pay. • Risk – The Committee monitors the bonus and LTIP to take into account risk levels. Pay is Our bonus schemes have evolved to ensure all our employees have the opportunity to focused on long-term performance through the LTIP, mandatory bonus deferral, recovery beappropriately rewarded for the achievement of our core pub and corporate goals. provisions and in-employment and post-employment shareholding requirements. To avoid Performance measures and targets are aligned to our vision of ‘Pubs to be proud of’ and conflicts of interest, Committee members are required to disclose any conflicts or potential cascade as appropriate, from Executive Directors down to pub level. conflicts ahead of Committee meetings. No Executive Director or other member of management is present when their own remuneration is under discussion. Mandatory bonus deferral (where applicable) and participation in the LTIP is extended to thesenior management team in line with the policy for Executive Directors. Share ownership is • Predictability – elements of the Policy are subject to caps. Examples of how remuneration encouraged and shareholding requirements apply to the Executive Committee and Leadership varies depending on performance is set out in the scenario charts (set out on page 85). Group. We also encourage long-term employee engagement through the offer of an all- TheCommittee may exercise its discretion to adjust Directors’ remuneration if a formula- employee share plan to all employees of the Group who meet a minimum service requirement. driven incentive pay-out is inappropriate in the circumstances. • Proportionality – there is a sensible balance between fixed pay and variable pay, and incentive pay is weighted to sustainable long-term performance. Incentive plans are subject to performance conditions that consider both financial and non-financial performance linked to strategy. Outcomes will not reward poor performance. • Alignment to culture – we operate with fairness, integrity and transparency across the organisation. Pay provided to employees is taken into account when setting policy for Executive Directors’ remuneration. Where possible, in support of our performance culture, we align remuneration across the Group. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 79 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Remuneration Policy How employee views are taken intoaccount Aims Salary, benefits and performance-related rewards provided to employees are taken into The Policy is designed to ensure that Executive Directors are provided with sufficient account when setting policy for Executive Directors’ remuneration. We engage with our remuneration to motivate each individual with incentives that are aligned to strategy and employees through Peakon monthly surveys and workforce engagement sessions. encourage enhanced performance. The Committee believes that variable pay should only be earned for achievement against stretching targets and will continue to ensure that targets In October of each year a paper is submitted to the Committee by the HR Director summarising provide an appropriate balance between motivating and rewarding Executive Directors to the outcome of any annual reviews made to the wider workforce (which includes all employees deliver stretching but sustainable performance, without encouraging excessive risk taking. except for the majority of pub-based employees who have their remuneration rate set by statute rather than the market). This paper is taken into account when setting Executive Directors’ The table below and the accompanying notes describe the Remuneration Policy for Executive remuneration effective from the start of October for the following 12 months. Directors. In addition, and where relevant, a similar paper is submitted in October covering the decisions Base salary taken by the Executive Committee relating to bonus payments for employees within the wider workforce. This is taken into consideration by the Committee when approving bonus awards Purpose and Core element of fixed remuneration, reflecting the individual’s role and for Executive Directors. link tostrategy experience. Our monthly engagement survey reaches allofour employees and our workforce engagement Operation Usually reviewed annually and fixed for 12 months commencing 1 October. sessions are attended by at least one Non-executive Director. The Committee engaged directly Whilst Executive Directors are contractually entitled to an annual review of their with employees to explain the alignment of pay across the Group and the key elements of the salary, there is no entitlement to an increase as a result of this review. Directors’ Remuneration Policy. Salary levels are determined by the Committee taking into account a range of How shareholder views are taken into account factors including: • role, experience and performance; In considering the operation of the Remuneration Policy, the Remuneration Committee will • underlying performance of the business; take into account the published remuneration guidelines and specific views of shareholders • alignment with workforce; and proxy voting agencies. • prevailing market conditions; and • external benchmarks for similar roles at comparable companies. The Committee is committed to open and transparent dialogue with shareholders andwelcomes feedback on Executive and Non-executive Directors’ remuneration. Opportunity Salary increases are reviewed in the context of salary increases across the wider workforce. The Committee considers any increase which is out of line with these TheRemuneration Committee will consult with our larger shareholders, where considered very carefully and such increases may be awarded where there is a reason to do appropriate, regarding changes to the operation of the Remuneration Policy and when the so taking into account relevant factors. These circumstances may include but are Remuneration Policy is being reviewed and brought to shareholders for approval. Furthermore, not limited to: the Remuneration Committee will consider specific remuneration concerns or matters raised at • increase in scope and responsibility; • development and performance in the role (including that if a newly any time by shareholders. appointed Executive Director’s salary is positioned below a market rate it may During 2022, we engaged with our largest investors as well as Institutional Shareholder Services be increased to a market rate over such period as the Committee considers appropriate); or (ISS), Investment Association (IA) and Glass Lewis, to understand their views on our proposed • a salary falling significantly below market positioning. new Policy and the proposed implementation in 2022/23. The outcome of this shareholder consultation is set out in the Chair’s Statement. Performance Not applicable, although the individual’s contribution and overall performance metrics are considerations in determining the level of any salary increase. 80 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Remuneration Policy Benefits Annual bonus Purpose and Ensures the overall package is competitive. Purpose and Rewards performance against targets which support the strategic direction of link tostrategy link tostrategy the Group. Compulsory deferral into shares aligns Executive Directors with shareholder interests and provides a retention element. Operation Executive Directors receive benefits in line with market practice which include a car allowance, private medical insurance and life assurance. Operation Performance measures and applicable targets are set annually and any payout is determined by the Committee after the period end, based on performance. Other benefits may be provided based on the role and individual circumstances. The Committee has discretion to vary the bonus payout should any formulaic These may include, for example, relocation and travel allowances. output not reflect the Committee’s assessment of overall business performance ornot be appropriate in the context of circumstances that were unexpected or Opportunity Set at a level which the Committee considers appropriate against the market unforeseen at the start of the bonus year. and provides a sufficient level of benefit based on individual circumstances. One third of any bonus paid (after tax) will be used to purchase shares which the Performance Not applicable. Executive Director must normally hold for three years. metrics Recovery provisions apply, as referred to below. Retirement benefits Opportunity The maximum annual bonus opportunity is 125% of base salary. Purpose and Contributing to savings to deliver appropriate income in retirement. link tostrategy Performance Performance measures are determined each year reflecting the business metrics priorities that underpin Group strategy. Operation Executive Directors are eligible to participate in the defined contribution pension scheme (or such other pension plan as may be deemed appropriate). At least 50% of the award will be based on financial performance measures aligned to the Group’s financial key performance indicators. The balance of In appropriate circumstances, Executive Directors may take a salary supplement thebonus opportunity may be based on non-financial objectives such as the instead of contributions into a pension plan. delivery of strategic/individual/ESG objectives. Opportunity Pension contributions (or cash allowance) will not exceed the pension No more than 20% of the relevant portion of the annual bonus is payable for contributions available to the majority of the workforce (which is currently delivering a threshold level of performance, and no more than 50% is payable for 3%ofsalary). delivering a target level of performance (where the nature of the performance metric allows such an approach). Performance Not applicable. metrics There is usually straight-line vesting between the threshold and target performance levels and between target and maximum performance levels. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 81 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Remuneration Policy Long Term Incentive Plan (‘LTIP’) Long Term Incentive Plan (‘LTIP’) continued Purpose and Incentivises Executive Directors to deliver against the Group’s strategy over the Opportunity The normal maximum award size will be up to 150% of base salary in respect of link tostrategy longer term. Long-term performance targets and share-based remuneration any financial year. support the creation of sustainable shareholder value. In exceptional circumstances the Committee reserves the right to award up to Operation Awards of conditional shares or nil-cost options can be made with vesting 200% of base salary in respect of any financial year. dependent on the achievement of performance conditions, normally over athree-year performance period. Vested LTIP awards are normally subject to For the reasons above, if an LTIP award is granted as a Linked Nil-Cost Option, anadditional holding period of two years before being released. theshares subject to the tax-advantaged option to which it is linked will not counttowards this limit. The Committee may grant nil-cost options in conjunction with a tax-advantaged option granted under the tax-advantaged schedule to the LTIP (a ‘Linked Nil-Cost Performance The vesting of LTIP awards is subject to the satisfaction of performance targets set Option’). This linking arrangement gives the participant and the Group the metrics by the Committee. opportunity to benefit from the tax treatment available in respect of tax- advantaged options without increasing the pre-tax value delivered to the Performance measures will be determined by the Committee for each LTIP award participant. in line with the long-term business strategy and KPIs. Threshold performance under each metric will result in no more than 25% of that portion of the award vesting. The The Committee has discretion to vary the formulaic vesting output applying to Committee will regularly review the performance conditions and targets to ensure any LTIP award where it believes the outcome does not reflect the Committee’s they are aligned to the Company’s strategy and remain challenging and reflective assessment of overall business performance or is not appropriate in the context of of commercial expectations. Financial or shareholder return targets will apply to circumstances that were unexpected or unforeseen at the date of grant. the majority of an award. LTIP Awards may (where permissible) carry a right to a separate payment (in cash All-employee share plan or shares) equal to the value of dividends that would have been received on the shares over the vesting period (and holding period if structured as a nil-cost Purpose and To provide alignment with Group employees and to promote share ownership. option). The payment may assume the reinvestment of the dividends. link tostrategy Recovery provisions apply as referred to below. Operation The Executive Directors may participate in any all-employee share plan operated by the Company. Opportunity The value of shares over which awards may be granted will be in line with the relevant legislative limits (from time to time). Performance Not applicable. metrics 82 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Remuneration Policy Shareholding guidelines Non-executive Director fees Purpose and To provide alignment with shareholders’ interests. Purpose and Non-executive Director fees are set at a level that reflects market conditions and link tostrategy link tostrategy is sufficient to attract individuals with appropriate knowledge and experience. Operation During employment Operation Fees are reviewed as required and amended to reflect market positioning and Executives are required to build up and retain a shareholding equivalent to 200% any change in responsibilities. of their base salary. The Remuneration Committee recommends the remuneration of the Chair to the Until the shareholding requirement is met, Executive Directors will be required to Board. Fees paid to Non-executive Directors are determined and approved by retain 50% of the net of tax shares they receive under any incentive plan. the Board as a whole. Post-employment The Non-executive Directors do not participate in the annual bonus plan or any Any Executive Director leaving the Company will be expected to retain the lower of the Group’s share incentive plans. Non-executive Directors may be eligible of the shares held at cessation of employment and shares to the value of 200% of toreceive benefits such as the use of secretarial support, travel costs or other salary, for a period of two years. The Committee will have discretion to amend benefits that may be appropriate (and may be reimbursed for any tax the requirement in exceptional circumstances. liabilitythereon). Opportunity Not applicable. Fees may be payable in cash or shares. Performance Not applicable. Opportunity Fees are set taking into account the level of fees paid to Non-executive Directors metrics serving on boards of similar-sized UK-listed companies and the time commitment and contribution expected for the role. Recovery provisions (malus and clawback) Non-executive Directors receive a basic fee and an additional fee for further duties (for example chairing a Committee or Senior Independent Director Annual bonus awards and LTIP awards are subject to recovery provisions which may be applied responsibilities or holding the position of Non-executive Director responsible for up to two years following the payment in the case of the annual bonus, and for up to two forworkforce engagement). years following vesting in the case of an LTIP award. These provisions may be applied in the Performance Not applicable. following circumstances: metrics • a material misstatement of the Company’s audited financial results; The Committee reserves the right to make any remuneration payments and payments for loss of • a material failure of risk management by, or corporate failure of, the Company, any member office notwithstanding that they are not in line with the Policy set out above where the terms of of the Company’s group (‘Group’) or a relevant business unit; the payment were agreed before this Policy came into effect or, at a time when the relevant • the Remuneration Committee determining that the relevant Participant or former Participant individual was not a Director of the Company (or other person to whom this Policy applies) and, has been guilty of serious misconduct; in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of the Company (or other such person). • serious reputational damage to the Company, any Group member or a relevant business unit as a result of the Participant’s misconduct or otherwise; For these purposes the term ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are agreed • an error in assessing a Performance Condition applicable to the Award; and at the time the award is granted. • in the case of recovery before vesting, other relevant circumstances at the discretion of theCommittee. Malus and clawback may be applied to any tax-advantaged option granted under the LTIP tothe extent permitted by the applicable tax legislation. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 83 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Remuneration Policy Explanation of performance metrics chosen Operation of share plans Performance measures are selected to reflect the Group’s strategy. Stretching performance The Committee may amend the terms of awards and options under its share plans in targets are set each year for the annual bonus and long-term incentive awards. In setting accordance with the plan rules in the event of a variation of the Company’s share capital or a these performance targets the Committee will take into account a number of different demerger, special dividend or other similar event or otherwise in accordance with the rules of reference points which may include the Group’s business plans and strategy and the those plans. Shares awards granted under any such plan may be settled (in whole or in part) marketenvironment. incash where permitted, although the Committee would only do so where the particular circumstances made it appropriate to do so – for example, where there is a regulatory The Committee retains the discretion to adjust or set different performance measures or targets restrictionon the delivery of shares. ifevents occur (such as a change in strategy, a material acquisition and/or a divestment of a Group business or a change in prevailing market conditions) which cause the Committee to Illustration of application of Remuneration Policy determine that the measures are no longer appropriate, and that amendment is required so that they achieve their original purpose. The charts on the following page show the relative split of remuneration between fixed pay (base salary, benefits and pension) and variable pay (annual bonus and LTIP) for each Discretion Executive Director on the basis of minimum remuneration, remuneration receivable for performance in line with the Company’s expectations and maximum remuneration The Remuneration Committee can exercise discretion in a number of areas when operating (includingand excluding share price appreciation of 50% on the LTIP award). the Company’s incentive schemes, in line with the relevant rules of the schemes and, where relevant, HMRC guidance and the legislation relating to tax-advantaged schemes. These In illustrating the potential reward, the following assumptions have been made: areas include (but are not limited to): • Minimum: Comprises fixed pay only using the salary on 1 October 2022, the benefits value • the choice of participants has been assumed to be equivalent to that included in the single figure calculation on page 87 and a 3% company pension contribution. • the size of awards in any year (subject to the limits set out in the policy table above) • On-target: Fixed pay plus a bonus pay-out at 50% of maximum and the FY2022/23 LTIP • the extent of payments or vesting in light of the achievement of the relevant performance vesting at 50% of face value. conditions • Maximum: Comprises fixed pay and assumes full pay-out under the annual bonus and that • determination of ‘qualifying leavers’ and the treatment of outstanding awards the FY2022/23 LTIP grant vests in full. (subjecttothe provisions of the scheme rules and the Remuneration Policy provisions), and • Maximum performance with share price appreciation of 50%: the maximum scenario • the treatment of outstanding awards (other than tax-advantaged options on a change assuming 50% share price growth on the LTIP award from the date of grant to vesting. ofcontrol). 84 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CORPORATE GOVERNANCE REPORT CONTINUED # Remuneration Policy Andrew Andrea (£'000) ![img-2.jpeg](img-2.jpeg) Hayleigh Lupine (£'000) ![img-3.jpeg](img-3.jpeg) # Recruitment Remuneration Policy # Executive Directors When setting remuneration packages for new Executive Directors, pay will be set in line with the Remuneration Policy outlined above. In determining appropriate remuneration, the Committee will take into consideration all relevant factors (including the quantum and nature of remuneration) to ensure the arrangements are in the best interests of Manitou's and its shareholders. | **Salary** | Base salary will be set at a level appropriate to the rate and experience of the Executive Director being appointed. This may include agreement on future increases up to a market rate, in line with experience and/or responsibilities and subject to good performance, where it is considered appropriate. | | --- | --- | | **Pension and benefits** | Pension and benefits will be provided in line with the Policy. | | **Relocation** | Appropriate costs and support will be covered if the recruitment requires relocation of the individual. | | **Annual bonus** | New joiners may receive a pro-rated annual bonus based on their employment as a proportion of the financial year and targets may be different to those set for other Executive Directors subject to a maximum annual bonus opportunity of 25% of base salary. | | **LTIP** | Grants under the LTIP will be made in line with the Remuneration Policy in the year of joining, subject to the maximum award limit of 200% of base salary. For the avoidance of doubt, in the case of an internal promotion, legacy arrangements should be allowed to continue including continuation of the plan the individual is in for the year of joining if required. | | **Buyout awards** | For external appointments, the Committee (if it is considered appropriate) may make an award to 'buy-out' incentive awards that will be forfeited or leaving a previous employer, to the extent possible buy-out awards will be made on a broadly like-for-like basis. In doing so the Committee will take account of relevant factors including the vehicle (i.e. cash or equity), the performance conditions attached to vesting, the vesting schedule and the likelihood of vesting of the forfeited incentives. The Committee would seek to incorporate buy-out awards in line with the Company's remuneration framework as far as is practical. The Committee may consider other components for structuring the buy-out, including cash or share awards, restricted stock awards and share options where there is a commercial rationale for doing so. | MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CORPORATE GOVERNANCE REPORT CONTINUED # Remuneration Policy # Non-executive Directors Fees payable to a newly appointed Chair or Non-executive Director will be in line with the fee policy in place at the time of appointment. # Service contracts and policy on payment for loss of office The Executive Directors have a service contract requiring nine months' notice of termination from either party as shown below. The current Non-executive Directors, including the Chair, do not have a service contract and their appointments, whilst for a term of three years, may be terminated without compensation at any time. All Non-executive Directors have letters of appointment, and their appointment and subsequent reappointment is subject to annual approval by shareholders. | Name | Commencement date | Unexpired term remaining as at 1 October 2022 | | --- | --- | --- | | Andrew Andrea | 3 October 2021 | Terminable on nine months' notice. | | Hayleigh Lupino | 3 October 2021 | Terminable on nine months' notice. | | Bridget Lea | 1 September 2019 | Fixed term expiring on 31 August 2025 (subject to renewal) and terminable on one month's notice. | | Octavia Morley | 1 January 2020 | Fixed term expiring on 31 December 2022 (subject to renewal) and terminable on one month's notice. | | Mathew Roberts | 1 March 2017 | Fixed term expiring on 28 February 2023 (subject to renewal) and terminable on one month's notice. | | William Rucker | 1 October 2018 | Fixed term expiring on 30 September 2024 (subject to renewal) and terminable on six months' notice. | The principles on which the determination of payments of loss of office will be approached are summarised below: | Provision | Treatment upon loss of office | | --- | --- | | **Payment in lieu of notice** | Payments to Executive Directors upon termination of their contracts will be equal to base salary plus the value of core benefits for the duration of the national notice period. They will also be entitled to pension contributions for the duration of the national notice period or the requisite cash allowance equivalent. The Executive Director will normally have a duty to seek alternative employment and any outstanding payments will be subject to offset against earnings from any new role. A de minimis value of £1,000 will apply for reporting purposes. | | Provision | Treatment upon loss of office | | --- | --- | | **Annual bonus** | 'Qualifying leavers' will be eligible to receive an annual bonus at the usual time with performance measured at the usual time. The annual bonus will normally be pro-rated for service during the financial year. Any bonus earned will be paid in cash and shares in line with the current policy. 'Non-qualifying' leavers will not normally be eligible to receive an annual bonus. Shares subject to a holding period will normally be released at the normal time. | | **LTIP** | The treatment of any award under the LTIP would be determined based on the leaver provisions contained within the LTIP rules. Awards are forfeited on cessation of employment except for 'qualifying leavers' (where awards vest subject to performance conditions and are normally scaled back pro rata to the proportion of the performance or vesting period served). Shares subject to a holding period will normally be released at the normal time. | | **Change of control** | There are no enhanced contractual provisions on a change of control. Upon a change of control incentive awards will usually vest and be subject to performance conditions. Pro-rating for time, to reflect the proportion of the performance period that has elapsed will ordinarily apply to LTIP awards. The Committee retains the discretion to waive pro-rating for time. Awards may vest on a similar basis on the occurrence of any other relevant event. | | **Other payments** | Payments may be made in the event of loss of office under the all-employee scheme (which is governed by its respective rules and the applicable tax legislation and does not provide for discretionary treatment). The Committee reserves the right to make any other payments in connection with a Director's cessation of office or employment where the payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement of any claim arising in connection with the cessation of a Director's office or employment. Any such payments may include but are not limited to payments in respect of accrued holiday pay, outplacement and legal fees and other relevant benefits. | 86 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Annual report on remuneration This part of the Directors’ Remuneration Report sets out how we have implemented our current Recognising the need to maintain motivation within our pub, operational and support teams, Remuneration Policy during the period ended 1 October 2022. Sections in the report not the Committee concluded that it would be in shareholders’ interests if the targets for both specifically stated as audited are not subject to audit. measures were adjusted to exclude the negative impact of Omicron from the financial targets by removing trading periods 1-4. The Committee also agreed that, in the first full year of our Executive Directors new strategy, it was important to make the equivalent adjustments to the senior management team bonus targets. To balance this use of positive discretion the quantum available under Total remuneration payable (audited) thefinancial measures applying to 70% of the bonus was reduced by four twelfths. The 30% applying to the strategic measures was unchanged as the targets remained unmodified and | | | | | | | | | | | | | | Long-term | | | Total | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 2 | | 3 | | 4 | | | | | | | | | | | | were assessed over the full 12 months. As a result, the bonus opportunity for the year was | | Period ended | Salary | | Benefits | | Pension | | Other | | Total fixed | | Bonus | | incentives | | variable | | | Total | | | | 1October 2022 | | £ | | £ | | £ | | £ | | £ | | £ | | £ | | | £ | | £ | reduced from 100% of salary to 76.66% of salary. | | Andrew Andrea 601,765 17,465 18,360 4,996 642,586 84,357 64,971 149,328 791,914 | | | | | | | | | | | | | | | | | | | | Targets were adjusted in the context of continuing uncertainty and economic challenges, | withthe aim of incentivising our people to achieve a rapid recovery post Omicron, and remain Hayleigh Lupino 385,310 13,478 11,603 4,996 415,387 54,075 7,660 61,735 477,122 focused on our strategic measures. The adjustments to the bonus were aligned across the Group and the adjusted target ranges are summarised below: Total fixed Long-term Total variable 2 | Period ended | Salary | | Benefits | | Pension | | remuneration | | Bonus | | incentives | | remuneration | | Total | | | Threshold | | Target | Maximum | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2 October 2021 | | £ | | £ | | £ | | £ | | £ | | £ | | £ | | £ | | (20% of | | (50% of | (100% of | | | | | | | | | | | | | | | | | | | Performance metric Weighting | maximum) | maximum) | | maximum) Actual % of salary | Andrew Andrea 392,928 14,719 70,727 478,374 0 0 0 478,374 Previous target Ralph Findlay 586,682 19,327 105,603 711,612 0 0 0 711,612 (applicable for 12 months) £170.81m £179.80m £189.00m £159.60m 1. Ralph Findlay stepped down from the Board on 2 October 2021. Andrew Andrea was appointed CEO and Hayleigh Lupino was appointed CFO. Both appointments were effective from 3 October 2021. Target adjusted Group EBITDA 30% 0% 2. Private medical insurance benefits are unchanged but premiums may vary from year to year. Benefits include a by the car allowance, private medical insurance and life assurance. Committee 3. Andrew Andrea and Hayleigh Lupino received a pension contribution of 3% of salary. applying for 4. This figure relates to the grant of Sharesave options during the reporting year. periods 5 –12 £122.60m £129.10m £135.50m £112.30m | Annual bonus 2021/22 | Previous target | | | --- | --- | --- | | Stretching targets were set at the start of 2021/22. Targets were based on a balanced mix of | (applicable for | | | | 12 months) | £60.42m £63.60m £66.84m £55.50m | financial (EBITDA and FCF) and strategic measures (performance vs Peach market tracker, Group free Reputation scores and employee engagement). Target adjusted 40% 0% cash flow by the During the year, the Remuneration Committee reviewed the operation of the Peach market Committee tracker. Following that review, at the March 2022 meeting, the Committee used its discretion applying for toreplace the Peach market tracker with a Group sales measure with equivalently stretching sales periods 5 –12 £45.30m £47.70m £50.10m £36.40m targets. As part of a balanced scorecard, Group sales better reflects overall financial performance. Group sales 10% £577.90m £608.30m £639.30m £563.10m 0% As noted above, having made a strong start to the year, with promising levels of Christmas Reputation score 10% 575 600 650 731 10% bookings, the business was heavily impacted by the trading restrictions imposed as a Employee engagement 10% 7.5 8.0 8.2 7.8 4% consequence of the Omicron variant in December 2021. It became quickly apparent that the EBITDA and cashflow performance conditions, which had very recently been set, had been Bonus outturn 14% rendered unachievable. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 87 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Annual report on remuneration The annual bonus outcomes for Executive Directors during the year are shown below. The Committee reviewed the outturn in relation to the NCF targets and was satisfied that the Asreported in the Annual Statement, on page 72, our business was impacted by economic pay-out was justified for the following reasons: volatility, rising costs, supply chain challenges and the cost-of-living crisis. Whilst performance • As a result of the beer company disposal, the Group holds a 40% investment in CMBC i.e., did not reach threshold on the financial measures, our people have worked hard to deliver the outcome of the disposal was not purely a substantial cash inflow. great guest experiences during the year, as shown in our Reputation score, and have remained highly engaged. The Committee is satisfied that no adjustments to the pay-outs • Considering the safeguards that were discussed at the time of the award, the NCF outturn arerequired, and that the outcome is reflective of underlying performance. The bonus is has not resulted in the underinvestment in our estate, with the capex programme now payable in cash. ensuring that every pub is refreshed at least once every 4 years, with the previous cycle being longer. Annual bonus outcome % salary (out of reduced • Additionally, the transaction and resulting cash inflow underpinned the financial stability maximum 76.66% Value of the Group during the pandemic and ensured we could avoid the potential Executive Director ofsalary) £ requirement to raise equity. Andrew Andrea 14% 84,357 • Awards were granted in December 2019, prior to the onset of the global pandemic (i.e., Hayleigh Lupino 14% 54,075 there was no potential for COVID-19 related windfall gains). Overall, the Committee is comfortable that the level of vesting is in line with underlying LTIP award vesting in respect of performance during 2021/22 performance over the performance period. As such, the awards will vest in December 2022, The 2019/20 LTIP award was granted in December 2019, prior to the disposal of Marston’s with the shares subject to a two-year holding period. BeerCompany into the partnership with Carlsberg. As reported in the 2021 Directors’ Remuneration Report, performance targets were set at the time with the assumption that the The 2019 awards will therefore vest as follows: beer company would remain a part of the Group and contribute to the underlying EPS number. Number of Number of 2 The beer company profit in 2019 equated to a 5.1p contribution to the underlying EPS target. The shares shares due Total 1 Executive Director granted to vest £ revised targets, ranges and outturn are shown below. NCF and relative TSR targets and ranges | were not adjusted. | Andrew Andrea 372,124 148,849 64,971 | | | | --- | --- | --- | --- | | The performance targets for these awards and the performance to 1 October 2022 are | | 3 | | | | Hayleigh Lupino | | 43,875 17,550 7,660 | shownbelow: 1. The share price was £1.294 at the time of grant of the award, compared to the three-month average share price On-target Maximum of £0.436 to 1 October 2022. Therefore, none of the value of the award is due to share price appreciation. Threshold 25% 50% 100% 2. Value of shares based on a three-month average share price of £0.436 to 1 October 2022. This value will be Performance metric Weighting vesting vesting vesting Actual LTIP vesting restated next year based on the actual share price on the date of vesting. 3. Hayleigh Lupino received the 2019 LTIP award in her previous role within the Group. Underlying EPS 40% 7.7p 8.0p 8.6p 4.3p 0% out of 40% Free cash flow 40% £100m £125m £150m £194.8m 40% out of 40% LTIP awards granted during 2021/22 LTIP awards were granted on 6 December 2021 as APSP awards. The APSP awards comprised Relative TSR vs FTSE 250 (excluding Investment Upper Below three elements: (i) an HMRC Tax Qualifying Option over shares with a total value at the date Trusts) 20% Median – quartile median 0% out of 20% ofgrant of £30,000 with an exercise price of £0.6705 per share; (ii) a ‘Linked Award’ which is, principally, a funding award in the form of a nil-cost option (i.e. in the form of an LTIP award) 40% out of 100% Total of maximum over such number of shares whose total value at exercise equals £30,000; and (iii) an LTIP award in the form of a nil-cost option over shares to the value of the remainder of the APSP award above the £30,000 limit. 88 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Annual report on remuneration The details of the awards granted are as follows: Non-executive Directors Number Total remuneration (Chair and Non-executive Directors) (audited) | | | Number of | | | ofTax | | | | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | nil-cost | Qualifying | | | | | | % of award | | | | | | | | | | | | | | | | | Percentage | | | options | | options | | Face value | | | vesting at | Performance | | Holding | | | Committee | | | | 2021/22 | | | 2020/21 | | | | | | | | | | 1 | | | 2 | | | | | | | | | | | | | | | | 1 | | | of salary | | granted | granted | | | | at grant | | threshold | | period | period | Base Fee | | | Chair | | SID | | Total | | | Total | | | | | | | | | | | | | | | | | | £ | | | £ | £ | | | £ | | | £ | Andrew Andrea 125% 1,078,580 44,742 730,946 25% | Financial | Financial | Bridget Lea 55,500 55,500 54,000 | | --- | --- | --- | | periods | periods | | | 2021/22– | 2024/25– | Octavia Morley 55,500 10,000 10,000 75,500 62,750 | | 2023/2024 | 2025/26 | | Matthew Roberts 55,500 10,000 65,500 61,500 Hayleigh Lupino 125% 675,336 44,742 468,555 25% William Rucker 206,000 206,000 200,000 1. Tax Qualifying option with an exercise price of £0.6705 per share. 2. Calculated using the mid-market share price at date of grant of £0.6705. Nick Varney 13,875 13,875 – The awards will vest subject to the satisfaction of performance metrics set out below: 1. The maximum authority for Non-executive Directors’ fees (in aggregate), as outlined in our Articles of Threshold On-target Association, is £750,000 a year, as approved by shareholders at our 2017 AGM. 25% 50% Maximum 100% Interests in ordinary shares (audited) Weighting vesting vesting vesting The beneficial interests of the Non-executive Directors and their connected persons in the Underlying PBT (in FY 2023/24) 40% £63.65m £67.0m £68.67m share capital of the Company are shown below: NCF (cumulative over three years) 40% £125m £150m £182m As at As at TSR v FTSE 250 (excluding Investment Trusts) 20% Median – Upper quartile 01.10.22 02.10.21 Bridget Lea 50,000 50,000 1. Straight-line vesting applies between threshold, on-target and maximum performance. Octavia Morley 25,000 25,000 All-employee scheme interests granted during the year During the year, the CEO and CFO received an award under the Company’s Sharesave Matthew Roberts 25,000 25,000 Scheme. The savings contract commenced on 1 September 2022; further details are William Rucker 400,000 200,000 shownbelow: Nick Varney 227,902 − | Number of | | | | | | | % of award | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | options | | Exercise | | Face value | | vesting at | Date on which | | | | | 1 | | 2 | | 3 | | | | | | granted | | price | | at grant | | threshold | | exercisable | Andrew Andrea 40,909 £0.44 £22,316 N/A 1 September 2025 Hayleigh Lupino 40,909 £0.44 £22,316 N/A 1 September 2025 1. The exercise price represents a 20% discount to the value of the shares at close of business on 31 May 2022. 2. The number of shares included in the award was determined based on their expected monthly saving over a 36-month period of £500 per month. 3. Calculated using the share price on 31 May 2022, of £0.5455. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 89 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Annual report on remuneration Payment for loss of office (audited) The total remuneration of the CEO over the past ten financial periods is shown below. Theannual bonus pay-out and LTIP vesting level as a percentage of the maximum No payments were made for loss of office. opportunityis also shown. | Payments to past Directors (audited) | | | | | | Total | | | Annual | LTIP vesting | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | remuneration | | | | bonus (% of | | | (% of | | No payments were made to past Directors other than as disclosed in the 2020/21 annual report | | Name | | | | | £ | maximum) | | maximum) | | | in relation to Ralph Findlay’s continuing private medical insurance. | | | 1 | | | | | | | | | | | 2021/22 Andrew Andrea | | | | 791,914 14% 40% | | | | | | | 1 Total shareholder return chart and CEO remuneration history 2020/21 Ralph Findlay 711,612 0% 0% This graph shows the value, at 1 October 2022, of £100 invested in the Company on 29 September 2019/20 Ralph Findlay 592,423 0% 0% 2012 compared to the value of £100 invested in the FTSE All Share Index. The FTSE All Share Index 2 2018/19 Ralph Findlay 722,432 0% 0% has been selected as a comparator because the Company is a member of that index. 2017/18 Ralph Findlay 807,665 17.7% 0% The intermediate points show the value at the intervening financial period ends. 2016/17 Ralph Findlay 803,303 20% 0% £ Marston’s TSR FTSE All Share TSR 2015/16 Ralph Findlay 1,008,320 40% 21% 200 2014/15 Ralph Findlay 876,788 40% 0% 2013/14 Ralph Findlay 1,121,294 25% 41.9% 150 2012/13 Ralph Findlay 937,312 0% 44.2% 100 1. Ralph Findlay stepped down from the Board and retired from the Group as CEO on 2 October 2021. Andrew Andrea was appointed CEO from 3 October 2021. 2. The performance conditions were achieved at a level such that 11.2% of the 2016/17 LTIP would have vested. However, the Executive Directors waived their rights to this award. 50 0 28 Sep 5 Oct 4 Oct 3 Oct 1 Oct 30 Sep 29 Sep 28 Sep 3 Oct 2 Oct 1 Oct 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 90 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Annual report on remuneration Notes: Change in remuneration of Directors’ and employee pay 1. Salary/fee reviews for the Executive Directors, Non-executive Directors, and salaried workforce are effective The table below shows the percentage change in the Directors’ salary, benefits and annual 1October. However, whilst Marston’s accounting reference date is 30 September, the Group reports on a bonus over the last three financial years. This is then compared to the wider workforce. It was 52week basis and, therefore, the period end date changes from year to year. The year-on-year comparisons inthe table above are based on the salaries/fees applying with effect from 1 October. Average employee agreed that all employees of the Group should be included in the comparison. Marston’s PLC change to salary is calculated by reference to the mean of employee pay. The majority of pub-based does not have any direct employees, as all employees within the Group are employed by a employees have their remuneration set by statute rather than the market. wholly owned subsidiary company, Marston’s Trading Limited. 2. Where the incumbent did not serve for the full year, the calculation has not been made as it is unrepresentative. Hayleigh Lupino was appointed CFO effective from 3 October 2021. Nick Varney was appointed Non-Executive Wider Andrew Hayleigh William Bridget Octavia Matthew Nick Director to the Board with effect from 1 July 2022. workforce Andrea Lupino Rucker Lea Morley Roberts Varney 3. Ralph Findlay stepped down from the Board and retired from the Group as CEO on 2 October 2021, as a result he has been removed from the table above. See the 2021 Annual Report for details on changes in Ralph’s | Salary/ | | 2021/22 and | | | | | --- | --- | --- | --- | --- | --- | | | 1 | | 4 | | remuneration when he was a Director. | | fees | | 2020/21 11.1% 53% | | N/A 3% 2.7% 8.7% 6.5% N/A | | 4 Andrew Andrea’s percentage increase from 2020/21 to 2021/22 reflects his appointment as CEO (having 2020/21 and previously been CFO) and the responsibilities, and associated level of benefits, that accompany that position. 2019/20 2.9% 2% N/A 0% 0% 0% 0% N/A 5. No changes to benefit policy. Premiums for private medical insurance may vary from year to year. Eligibility to receive the individual benefits under the policy may be determined by an employee’s role or length of service, 2019/20 and where applicable. 2018/19 6.4% 2% N/A 0% N/A N/A 0% N/A 6. During the 2019/20 period, during the first national lockdown, those employees who continued to work were asked to accept a 20% voluntary reduction in their salary during the period from April to July 2020, with normal Taxable 2021/22 and See salaries paid from August 2020. The car allowance element of the benefits policy was subject to the 20% benefits 2020/21 note 5 18.7% N/A – – – – – voluntary reduction during the same period. The increase in the Executive Directors’ benefits from 2019/20 to 2020/21 therefore reflects the ending of this reduction. | 2020/21 and | | See | | | | | --- | --- | --- | --- | --- | --- | | | | | 6 | | 7. No bonuses were payable in respect of 2020/21, or the prior period, based on Group performance, therefore | | 2019/20 | note 5 5.8% | | | N/A – – – – – | | acomparison with bonuses earned in respect of 2021/22 is not meaningful. Bonuses and other discretionary 2019/20 and See payments were earned by a number of employees, within the wider workforce, during the prior period, details 2018/19 note 5 (6.3%) N/A – – – – – of which are set out on pages 59 to 60 of the 2020 Annual Report and Accounts. Annual 2021/22 and See 7 | bonus | 2020/21 | note 7 100% N/A – – – – – | | | --- | --- | --- | --- | | | 2020/21 and | | See | | | 2019/20 | note 7 0% N/A – – – – – | | | | 2019/20 and | | See | | | 2018/19 | note 7 0% N/A – – – – – | | MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 91 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Annual report on remuneration CEO pay ratio Two sets of pay ratios are included in the table above for 2019/20, reflecting Ralph Findlay’s voluntary reduction in salary and benefits during the period from April to July 2020 and his The tables below show how the CEO’s single total figure of remuneration compares with the contractual salary and benefits for 2019/20. There has not been a significant change to the CEO equivalent figures for UK employees whose remuneration was ranked at the 25th percentile, pay ratio over the last three years (when compared to the contractual salary and benefits). 50th percentile, and 75th percentile. A substantial proportion of the CEO’s total remuneration is performance-related and delivered | | | 25th | | 50th | | 75th | | | --- | --- | --- | --- | --- | --- | --- | --- | | | percentile | | percentile | | percentile | | in shares. The ratios will depend significantly on the CEO’s annual bonus and long-term | | Year Method | pay ratio | | pay ratio | | pay ratio | | incentive outcomes and may fluctuate year-on-year. The Company considers themedian pay | ratio is consistent with the Group’s wider policies on employee pay, rewardand progression. 2021/22 Option B 46:1 45:1 40:1 Relative importance of spend on pay 2020/21 Option B 47:1 44:1 43:1 The table below demonstrates the relative importance of the Group’s expenditure on total 2019/20 (based on contractual salary and benefits) Option B 48:1 45:1 41:1 employee pay compared to dividend payments to shareholders. 2019/20 (reflecting voluntary reduction in salary and 2021/22 2020/21 % change benefits) Option B 40:1 37:1 34:1 1 Dividend payments £0m £0m – Note: 2 3 Andrew Andrea was appointed CEO from 3 October 2021. As a result, the 2021/22 pay ratio is assessed against Andrew Total employee pay £214.0m £186.7m 14.6% Andrea’s total remuneration. Prior years are assessed against Ralph Findlay’s total remuneration who stepped down from the Board 2 October 2021. 1. No distributions by way of share buybacks were made to shareholders during the 2021/22 or 2020/21 financialyears. 25th 50th 75th 2. Excluding non-underlying items. percentile percentile percentile 3. The increase in total employee pay is predominately due to the increase in the NMW during the year, and the Component CEO £ £ £ £ additional uplifts applied to the NMW rates for all age groups by the Company. Base salary 601,765 17,108 17,472 19,601 Total remuneration 791,914 17,108 17,472 19,601 External appointments for Executive Directors Executive Directors are permitted to take up external appointments, subject to approval by We have chosen Option B which uses the hourly rate data from the most recent Gender Pay the Board, and are allowed to retain any fees received. Gap reporting. This represents the most efficient and robust method to determine the respective pay ratios. To ensure year-on-year methodology and reporting is consistent, we have removed Directors’ share interests (audited) any variances in the total remuneration package for employees sitting at each of the percentiles Each Executive Director is required to build and retain a shareholding with a value equal to as, for example, not all employees contribute to a pension scheme or receive a bonus. In order two times salary. To achieve these holdings under the current policy, Directors are required to determine the full-time equivalent salary component for the representative employees, toretain any vested shares from the LTIP, net of tax, until the guidelines are satisfied. Under the thehourly rate was multiplied by 35 hours to calculate the full-time equivalent salary. The proposed policy, Executive Directors will be required to retain 50% of the net of tax shares they calculations for the relevant representative employees were performed as at 5 April 2022. receive under the annual bonus and LTIP. Shares subject to vested LTIP awards which are in a Sensitivity analysis was performed around the 25th, median and 75th percentile employees holding period count towards this guideline (on a net of assumed tax basis) and deferred toensure that they were reasonably representative. bonus sharesalso count towards the shareholding guideline. As at 1 October 2022, Andrew Andrea held shares worth 84% of base salary and Hayleigh Lupino held 18% of base salary in shares. 92 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Annual report on remuneration Executive Directors’ share interests as at 1 October 2022 Brought Carried Exercise Grant forward Exercised/ Cancelled/ forward price Vesting Release 2 | Shares owned outright Share options | | | | | | 1 | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Shareholding | Actual % | date | | 02.10.21 Granted | vested | lapsed | 01.10.22 | £ | date | date | | | Not subject to | Subject to | requirement | ofsalary | | | | | | | | | | 2 performance performance (%of salary) holdingAt 01.10. 22 At 02.10.21 Hayleigh LTIP 2018 52,124 – – 52,124 0 N/A 2021 N/A Lupino 3 2019 43,875 – – – 43,875 Nil 2022 2024 Andrew Andrea 390,773 352,773 40,909 2,005,741 200% 84% May Hayleigh Lupino 104,629 – 71,038 869,406 200% 18% 4 2021 75,324 – – – 75,324 Nil 2024 2025 1. The table above includes the holdings of persons connected with each of the Directors. Dec – 675,336 – – 675,336 Nil 2024 2026 2. All scheme interests are structured as nil-cost or tax-advantaged options. 2021 3. Of the 71,038 share options, 40,909 are Sharesave options. – 44,742 – – 44,742 £0.6507 2024 2026 Sharesave June In assessing the extent to which the guidelines are satisfied, shares are valued at the end of the 2022 – 40,909 – – 40,909 £0.44 2025 N/A relevant financial year. Once the required holding has been achieved, any change in the share price is disregarded when assessing the value attributed to shares already held. Deferred May bonus 2021 30,129 – – – 30,129 Nil 2024 N/A Executive Directors’ interests in share options as at 1 October 2022 1. Awards granted annually in December, unless otherwise stated. 2. The performance conditions applying to the 2018/19 LTIP are set out on page 67 of the 2019 Directors’ Brought Carried Exercise Remuneration Report. | Grant | | forward | Exercised/ | | Cancelled/ | | forward | price | | Vesting | | Release | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 1 | | | | | | | | | | | | | 3. The performance conditions applying to the 2019/20 LTIP are set out on page 67 of the 2020 Directors’ | | date | | 02.10.21 Granted | | vested | | lapsed | 01.10.22 | | £ | | date | | date | | Remuneration Report. 2 Andrew LTIP 2018 473,033 – – 473,033 0 N/A 2021 N/A 4. The performance conditions applying to the 2020/21 LTIP are set out on page 67 of the 2021 Directors’ Andrea Remuneration Report. 3 2019 372,124 – – – 372,124 Nil 2022 2024 5. The performance conditions applying to the 2021/22 LTIP are set out on page 67 of the 2021 Directors’ Remuneration Report. May 4 6. The exact release date will be confirmed when the date of the relevant preliminary results announcement is 2021 510,295 – – 510,295 Nil 2024 2025 known and the associated closed period ends. Dec – 1,078,580 – – 1,078,580 Nil 2024 2026 2021 There have been no changes to the Directors’ share interests and interests in share options – 44,742 – – 44,742 £0.6507 2024 2026 between 1 October 2022 and 5 December 2022 (being the latest practical date prior to the Sharesave June date of this report). 2022 – 40,909 – – 40,909 £0.44 2025 N/A Implementation of the Policy in 2022/23 The section below sets out the implementation of the Remuneration Policy in 2022/23 which has been set in line with the Remuneration Policy to be put to shareholders at the 2023 AGM. Base salary During the year, the Committee reviewed the salary increases for the wider salaried workforce taking into account high inflation and the cost of living and also the need to control our cost base. As a result of the review, the majority of the wider salaried workforce received an increase of 4% of salary. In addition, most salaried employees were eligible to receive a one-off payment of up to £750 to help with the sharp increase to the cost of living and energy costs. Therefore, with an increase of 4% applied to the majority of the salaried workforce, plus the additional payments, the Committee was comfortable with a lower increase of 3% for Executive Directors. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 93 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Annual report on remuneration | | Base salary | | | Base salary | | | The extent to which the LTIP awards will vest will be determined by the performance measures | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2021/22 | | | 2022/23 | | listed below. | | | | | | | Name | | | £ | | | £ | | | | | | | | | | | | | | | | | Threshold 25% | | Maximum 100% | | | Andrew Andrea | | 602,550 | | | 620,626 | | | Weighting | | vesting | | vesting | | Hayleigh Lupino 386,250 397,838 | | | | | | | Underlying Profit Before Tax in FY 2024/25 30% £72.0m £87.0m | | | | | | Net Cash Flow (three-year aggregate) 30% £130.0m £164.0m Note: The majority of the wider workforce (pub-based employees) have their remuneration set by statute rather than the market. Return on Capital Employed (three-year average) 20% 6.5% 7.3% Annual bonus Relative Total Shareholder Return vs FTSE250 (excl. The annual bonus opportunity for Executive Directors will be 100% of salary, in line with the Investment Trusts) 20% Median Upper quartile previous year. Performance measures remain unchanged and are aligned to our strategic objective and core pub and corporate goals. ROCE has been introduced as a performance measure and will drive value for shareholders. ROCE, alongside the other measures previously included, will provide a rounded assessment of | | Performance | | % Weighting for | | | | --- | --- | --- | --- | --- | --- | | Strategic pillar | | measure | | 2022/23 | our overall profitability and shareholder return. | | We will grow Group EBITDA 30% | | | | | The Committee is comfortable that these targets provide an appropriate level of stretch and | represent a strong link between pay and performance. Free cash flow 20% Non-executive Director remuneration Group sales 20% A 3% increase will be applied to the base fee, and additional fees, for Non-executive Directors Reputation and the Chair’s fee. The fees that will apply from 1 October 2022 are set out below. We are guest obsessed score 15% 2022/23 2021/22 Employee We raise the bar engagement 15% Chair’s fee £212,180 £206,000 The Directors consider that the annual bonus targets for 2022/23 financial year are Non-executive Director basic fee £57,165 £55,500 commercially sensitive. The Committee will continue to disclose how the bonus pay-out Additional fee for: delivered relates to performance against the targets in next year’s report. Chairing the Audit Committee £10,300 £10,000 One third of any bonus paid will be deferred into shares which must be held for three years. Chairing the Remuneration Committee £10,300 £10,000 LTIP Senior Independent Director £10,300 £10,000 For the next policy period, recognising that stretch targets would be set in line with the longer-term strategy to 2025 and beyond, we had intended to increase the grant level from Approval 125% to 150% for the CEO combined with challenging and stretching performance targets to This Remuneration Report was approved by the Board of Directors on 7 December 2022 and drive top-end performance. signed on its behalf by the Remuneration Committee Chair: However, should the current weakness in the share price, at the time of writing, persist, we have decided that, for the FY 2022/23 award, we will reduce the grant level for the CEO from OCTAVIA MORLEY CHAIR OF THE REMUNERATION COMMITTEE 150% back to 125% of salary, with the same proportionate scale back for the CFO, whose grant 7 December 2022 level would reduce from 125% to 104% of salary, unless there is a material uplift in the share price between now and the grant date in December 2022. 94 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CORPORATE GOVERNANCE REPORT CONTINUED # Directors' report This section contains additional information which the Directors are required by law and regulation to include within the Annual Report and Accounts. This section, along with the information from the Chair's Statement on page 3, to the Statement of Directors' Responsibilities on page 98, constitutes the Directors' Report in accordance with the Companies Act 2006. ## Strategic Report The Company is required by the Companies Act to include a Strategic Report in this document. The information that fulfils the requirements of the Strategic Report can be found on pages 1 to 55, which is incorporated in this report by reference. ## Corporate Governance Statement The Corporate Governance Statement, as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rules (DTR) 7.2, is set out on page 57 and is incorporated into this report by reference. ## Dividends The Board confirms that given the disruption to trading in 2021 and the road to recovery from COVID-19 in the current financial year, and the current uncertainty, there is no intention to pay dividends in respect of financial year 2021/22. The Board is cognisant of the importance of dividends to shareholders and intends to keep potential future dividends under review. ## Directors Biographies of the Directors currently serving on the Board are set out on pages 58 and 59. Changes to the Board during the period are set out in the Corporate Governance Report starting on page 56. Details of Directors' service contracts are set out in the Directors' Remuneration Report on page 86 and their shareholdings are set out on page 93. With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the UK Corporate Governance Code, the Companies Act 2006 and related legislation. The Articles may be amended by special resolution of the shareholders. In accordance with the requirements of the UK Corporate Governance Code, all Directors will offer themselves for election or re-election at the AGM on 24 January 2023. ## Directors' shareholdings The interests of Directors and their connected persons in the shares of the Company are set out on pages 89 to 93 of the Directors' Remuneration Report. ## Directors' indemnities and insurance The Company maintains Directors' and Officers' Liability Insurance in respect of legal action that might be brought against its Directors and Officers. In accordance with the Company's Articles of Association and to the extent permitted by law, the Company has indemnified each of its Directors and other Officers of the Group against certain liabilities that may be incurred as a result of their position within the Group. These indemnities were in place for the whole of the period ended 1 October 2022 and as at the date of the report. There are no indemnities in place for the benefit of the external Auditor. ## Directors' powers Under the Articles of Association, the Directors have authority to allot ordinary shares subject to the aggregate set at the 2022 Annual General Meeting (AGM). The Company was also given authority at its 2022 AGM to make market purchases of ordinary shares up to a maximum number of 63,474,851 shares. Similar authority will again be sought from shareholders at the 2023 AGM. The powers of the Directors are further described in the Corporate Governance Report on pages 56 to 98. ## Share capital and shareholder voting rights Details of the Company's issued share capital and of the movements during the period are shown in note 28 in the financial statements on page 50. The Company has one class of ordinary shares and one class of preference shares. On a poll vote, ordinary and preference shareholders have one vote for every 25 pence of nominal value of ordinary and preference share capital held in relation to all circumstances at general meetings of the Company. The issued nominal value of the ordinary shares and preference shares is 100% of the total issued nominal value of all share capital. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights. Details of employee share schemes are set out in note 5 to the financial statements on page 28. Where shares are held on behalf of the Company's share schemes, the trustees have waived their right to vote and to dividends. No person has any special rights of control over the Company's share capital and all issued shares are fully paid. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CORPORATE GOVERNANCE REPORT CONTINUED # Directors' report # Significant shareholders Notifications of the following voting interests in the Company's ordinary share capital have been received by the Company (in accordance with Chapter 5 of the DTR). The information shown below was correct at the time of disclosure. However, the date received may not have been within the current financial reporting period and the percentages shown (as provided at the time of disclosure) have not been recalculated based on the issued share capital at the period end. It should also be noted that these holdings may have changed since the Company was notified, however, notification of any change is not required until the next notifiable threshold is crossed. | Shareholder | As at 1 October 2022 Voting rights | % of voting rights | Nature of interest | | --- | --- | --- | --- | | HSBC Holdings plc | 11,563,270 | 6.17 | Indirect | | Aberforth Partners LLP | 9,859,977 | 5.27 | Indirect | | Sand Grove Capital Management | 9,364,287 | 5.01 | N/A | | Dimensional Fund Advisors LLP | 9,339,455 | 4.98 | Indirect | | ClearBridge Investments Limited | 9,307,805 | 4.98 | Indirect | | The Capital Group Companies, Inc | 9,291,379 | 4.96 | Indirect | | Standard Life Aberdeen plc | 9,228,860 | 4.93 | Indirect | | Brewin Dolphin | 8,392,338 | 4.93 | Indirect | | Coltrane Asset Management | 7,612,219 | 4.06 | N/A | | Royal London Asset Management Limited | 6,794,023 | 3.99 | Direct | Subsequent to the year end, between 1 October 2022 and 5 December 2022 (being the latest practical date prior to the date of this report), the following have disclosed information in accordance with DTRS. | Shareholder | Voting rights | % of voting rights | Date of notification | | --- | --- | --- | --- | | HSBC Holdings plc | 9,539,383 | 5.099 | 16 November 2022 | | Bayberry Capital Partners LP | 9,410,500 | 5.03 | 24 November 2022 | | Morgan Stanley | 9,381,749 | 5.00 | 29 November 2022 | # Preference shares The Company also discloses the following information, obtained from the Register of Members for the preference shares: | Shareholder | Number of Shares | % of Issue Share Capital | | --- | --- | --- | | Fake Nominees Limited | 31,548 | 42.06 | | Mrs Heather Mabel Medlock | 10,407 | 13.88 | | George Mary Allison Limited | 5,500 | 7.3 | | Rulegale Nominees Limited | 4,550 | 6.0 | | Mr Nathanael Peter Knowles | 4,356 | 5.8 | | Mr Neil Aston and Mr Thomas Alexander Southall | 2,855 | 3.8 | | Cgwl Nominees Limited | 2,805 | 3.7 | | Mrs Helen Michels | 2,750 | 3.6 | | Mr Richard Somerville | 2,750 | 3.6 | # Change of control There are a number of agreements that take effect after, or terminate upon, a change of control of the Company, such as commercial contracts, bank loan agreements, property lease arrangements and employee share plans. None of these are considered to be significant in terms of their likely impact on the business as a whole. Furthermore, the Directors are not aware of any agreements between the Company and its Directors or employees that provide for compensation for loss of office or employment that occurs because of a takeover bid. # Employee information The average number of employees within the Group is shown in note 5 to the financial statements on page 28. Marston's is a responsible employer committed to building a diverse culture where our teams and guests feel welcome, supported and included for who they are. We aim to ensure this commitment is reflected in how we attract talent, how we nurture and develop people internally, and how we ensure our guests have the best experience. We do not discriminate in any way, ensuring that training, career development and promotion opportunities are available to all employees irrespective of gender, race, age or disability. We are committed to keeping employees up to date on business performance and our strategy, helping them to understand the part they can play in building a successful business. 96 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # CORPORATE GOVERNANCE REPORT CONTINUED # Directors' report This ensures our people are both engaged and enabled, having both the desire and the ability to make a difference. We do this in a variety of ways through centralised communications, as well as leader and manager-led engagement. # Human rights Marston's is committed to respecting and upholding human rights, as expressed in the United Nations Universal Declaration of Human Rights, within our business and also within our supply chain. Our behaviours are aligned with our belief of, and commitment to, the Declaration of Human Rights. Our Human Rights Policy is available at www.marstonpubs.co.uk/responsibility # Modern Slavery Statement Our Modern Slavery Act disclosure is available on our website www.marstonpubs.co.uk/responsibility and more details can be found on page 40. # Research and development Our Director of Insights and his team regularly undertake internal research and analysis such as guest satisfaction surveys and panelling, together with working with third-party independent data providers with expertise in retail and hospitality, including UK Hospitality, CGA, and Reputation. # Greenhouse gas emissions, energy consumption and energy efficient action One of our key priorities is to reduce our environmental impact. We recognise the importance of this to the long-term profitability of the business and operating a high quality estate. Many of the environmental initiatives we adopt reduce our environmental impact as well as saving expenditure on energy and utilities. More details on how we are reducing our environmental impact can be found on pages 26 and 31 in our Strategic Report. # Political donations Our policy is not to make any donations for political purposes in the UK or to donate to EU political parties or incur EU political expenditure. # Financial instruments The disclosures required in relation to the use of financial instruments by the Group, together with details of our treasury policy and management are set out in note 25 to the financial statements on pages 43 to 49. # Auditor KPMG LLP have indicated their willingness to continue as the external Auditor and their reappointment has been approved by the Audit Committee. Resolutions to reappoint them and to authorise the Audit Committee to determine their remuneration will be proposed at the 2023 AGM. # Going concern The Group's business activities, together with the factors likely to affect its future development performance and position are set out in the Strategic Report. The financial position of the Group is described on pages 7 to 9. Further details are set out in the financial statements on pages 38 to 46. In addition, note 25 to the financial statements on pages 43 to 49 includes the Group's objectives, policies and processes for managing its exposures to interest rate risk, foreign currency risk, counterparty risk, credit risk and liquidity risk. Details of the Group's financial instruments and hedging activities are also provided in note 25. The financial statements set out on pages 38 to 54 and 55 to 66 have been prepared on the going concern basis. Accordingly, whilst both the base case and severe but plausible downside case indicate that there is adequate headroom forecast throughout the period under review, the forecast indicate that the Debt Cover and Interest Cover bank and private placement covenants are forecast to be breached at 31 December 2022 and the Directors have therefore concluded that a material uncertainty over going concern exists. Further information and guidance on covenant amendments is set out on page 7. # Annual General Meeting (AGM) The AGM of the Company will be held on 24 January 2023 at The Farmhouse at Mackworth, 60 Ashbourne Road, Derby DE22 4LY. Shareholders are encouraged to submit their proxy voting instructions and any questions in advance of the meeting. Further details can be found in the notice convening the meeting. The notice, together with details of the special business to be considered and explanatory notes for each resolution, is distributed separately to shareholders. It is also available on the shareholder section of our website at www.marstonpubs.co.uk/investors where a copy can be viewed and downloaded. By order of the Board BETHAN RAYBOULD GENERAL COUNSEL & COMPANY SECRETARY 7 December 2022 Company registration number: 3/46 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### CORPORATE GOVERNANCE REPORT CONTINUED ## Statement of Directors’ responsibilities ## in respect of the Annual Report and the Financial Statements The Directors are responsible for preparing the Annual Report and the Group and parent Responsibility statement of the Directors Company financial statements in accordance with applicable law and regulations. We confirm that to the best of our knowledge: Company law requires the Directors to prepare Group and parent Company financial • the financial statements, prepared in accordance with the applicable set of accounting statements for each financial year. Under that law they have elected to prepare the Group standards, give a true and fair view of the assets, liabilities, financial position and profit or financial statements in accordance with UK-adopted international accounting standards and loss of the Company and the undertakings included in the consolidation taken as a whole; applicable law and have elected to prepare the parent Company financial statements in and accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the • the Strategic Report/Directors’ Report includes a fair review of the development and UKand Republic of Ireland. performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and Under company law the Directors must not approve the financial statements unless they uncertainties that they face. aresatisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the Group’s profit or loss for that period. In preparing each of the Group and We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and parent Company financial statements, the Directors are required to: understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant, reliable and prudent; Disclosure of information to Auditor • for the Group financial statements, state whether they have been prepared in accordance The Directors who held office at the date of approval of this Directors’ Report confirm that, with UK-adopted international accounting standards; sofar as they are each aware, there is no relevant audit information of which the Company’s Auditor is unaware; and each Director has taken all the steps that they ought to have taken as • for the parent Company financial statements, state whether applicable UK accounting a Director to make themselves aware of any relevant audit information and to establish that standards have been followed, subject to any material departures disclosed and explained the Company’s Auditor is aware of that information. in the financial statements; • assess the Group and parent Company’s ability to continue as a going concern, disclosing, ANDREW ANDREA HAYLEIGH LUPINO as applicable, matters related to going concern; and CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER 7 December 2022 • use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal controls asthey determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 98 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MARSTON'S PLC # 1. OUR OPINION IS UNMODIFIED We have audited the financial statements of Marston's PLC ('the Company') for the 52 week period ended 1 October 2022 which comprise the Group Income Statement, Group Statement of Comprehensive Income, Group Cash Flow Statement, Group Balance Sheet, Group Statement of Changes in Equity, Company Balance Sheet, Company Statement of Changes in Equity, and the related notes, including the accounting policies in note 1 to both the Group and parent Company financial statements. In our opinion: - the financial statements give a true and fair view of the state of the Group's and of the parent Company's affairs as at 1 October 2021 and of the Group's profit for the period then ended; - the Group financial statements have been properly prepared in accordance UK-adopted international accounting standards; - the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and - the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. # Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) ('ISAs (UK)') and applicable law. Our responsibilities are described below. We believe that the audited evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the Audit Committee. We were first appointed as auditor by the shareholders on 24 January 2020. The period of total uninterrupted engagement is for the three financial periods ended 1 October 2022. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided. Overview | **Materiality:** | £12.3million (2021: £9.0million) | | --- | --- | | Group financial statements as a whole | 0.5% (2021: 0.4%) of total assets | | **Coverage** | 100% (2021:100%) of Group total assets | | --- | --- | | **Key audit matters** | vs 2021 | | --- | --- | | **Recurring risks** | Going Concern | ↔ | | --- | --- | --- | | | Valuation of the estate | ↔ | | --- | --- | --- | | | **New:** Impairment of CMBC associate | ▲ | | --- | --- | --- | MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED ### 2.MATERIAL UNCERTAINTY RELATED TO GOING CONCERN The risk Our response Going Concern Disclosure quality Our procedures included: We draw attention to note 1 to the financial statements which There is judgement involved in the Directors’ conclusion that risks • Funding Assessment: We inspected correspondence with indicates that the Group’s and the parent Company’s ability to and circumstances described in note 1 to the financial statements CreditProviders and board minutes during the period and continue as a going concern is dependent on the ability to achieve represent a material uncertainty over the ability of the Group and afterperiod-end to the date of authorisation of the Annual further covenant waivers or amendments if required. the parent Company to continue as a going concern for a period of Report toidentify any indications that Credit Providers may at least a year from the date of approval of the financial statements. notcontinue to support the Company through covenant These events and conditions, along with the other matters amendments. Wenoted that the directors had not identified explained in note 1, constitute a material uncertainty that may Clear and full disclosure of the facts and the Directors’ rationale for atechnical default in their initial going concern assessment, cast significant doubt on the Group’s and the parent Company’s the use of the going concern basis of preparation, including that therefore had not taken into account a risk in relation to this ability to continue as a going concern. there is a related material uncertainty, is a key financial statement respect and we requested that the directors include additional disclosure and so was the focus of our audit in this area. Auditing risks in their assessment. However as noted in Note 35, Our opinion is not modified in respect of this matter. standards require that to be reported as a key audit matter. 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, theCredit 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). 100 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # 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 risk | Our 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 'effective freehold' leasehold properties held at fair value is a key area 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 in the 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 of estimation 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 value'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). | MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### 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 risk Our response Valuation of CMBC Investment Forecast-based assessment Our procedures included: (£260.3 million; 2021: £277.4 million) The Group and Parent company hold an investment in associate • Assessing component audit: We assessed the work performed named Carlsberg Marston’s Brewing Company (‘CMBC’). The bythe associate audit team on the in scope component and Refer to page 71 Audit Committee Report, page 122 accounting investment is significant and at risk of impairment due to the cost considered the results of that work on the associate’s policy and page 138 financial disclosures. ofliving crisis and high inflation impacting the brewing sector. investmentvalue; Theestimated recoverable amount is subjective due to the inherentuncertainty involved in forecasting and discounting • Historical comparisons: We evaluated the historical accuracy of futurecashflows. management’s forecasting against actual results in the period. The effect of these matters is that, as part of our risk assessment, • Our sector experience: We compared management’s discount we determined that the valuation of investment in CMBC has a rate with our own calculation of the discount rate based on our high degree of estimation uncertainty, with a potential range of valuations experience and knowledge of the sector. reasonable outcomes greater than our materiality for the financial statements as a whole. In conducting our final audit work, we • Sensitivity analysis: We evaluated the appropriateness and concluded that reasonably possible changes to the value in use likelihood of management’s sensitivities and their impact of ofthe investment in CMBC would not be expected to result in theoverall impairment test outcome and performed our own material impairment. additional sensitivity analysis. • Assessing transparency: We critically assessed the adequacy ofthe 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. 102 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MARSTON'S PLC CONTINUED ## 4. OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT Materiality for the Group financial statements as a whole was set at £12.3 million (2021: £9.0 million), determined with reference to a benchmark of Group total assets (of which it represents 0.5% (2021: 0.4%). In addition, we applied materiality of £3.5 million (2021: £3.3 million), to specific Group income statement items which may be of specific interest to users and that could reasonably be expected to influence the Company's members' assessment of the financial performance of the Group. These items comprise revenue and underlying operating costs. Materiality for these items was determined with reference to revenue, normalised by averaging over the last four periods due to volatility in the results as a consequence of COVID-19. We consider total assets to be the most appropriate benchmark given the majority of total asset value is in the pub estate and these assets act as security for the group's securitised borrowings and will therefore be a focus of users of the accounts. Materiality for the Parent Company financial statements as a whole was set at £9.0 million (2021: £8.0 million), determined with reference to a benchmark of parent Company total assets, of which it represents 0.7% (2021: 0.6%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to £9.1 million (2021: £6.8 million) for the Group and £6.8 million (2021: £6.0 million) for the parent Company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.6 million (2021: £0.5 million), in addition to other identified misstatements that warranted reporting on qualitative grounds. We subjected the Group's only associate to a full scope audit as we determined it was financially significant. Materiality was set at £5.5 million (2021: £5.6 million) based on its relative size adjusting for Marston's 40% share in the business. The Group team performed the audit of the Group as if it was a single aggregated set of financial information. The audit was performed using the materiality and performance materiality level set out above. Group total assets £2,522.7 million (2021: £2,467.9 million) ![img-4.jpeg](img-4.jpeg) Total Assets Group materiality Group materiality £12.3 million (2021: £9.0 million) £12.3 million Whole financial statements materiality (2021: £9 million) £9.2 million Whole financial statements performance materiality (2021: £6.8 million) £5.5 million Materiality applied to the audit of Marston's sole associate, Carlsberg-Marston's Brewing Company Limited ("CMBC") (2021: £5.6 million) £0.6 million Misstatements reported to the Audit Committee (2021: £0.6 million) ![img-5.jpeg](img-5.jpeg) Full scope for Group audit purposes 2022 Full scope for Group audit purposes 2021 ![img-6.jpeg](img-6.jpeg) ![img-7.jpeg](img-7.jpeg) MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED We communicated identified fraud risks throughout the audit team and remained alert to any ### 5. GOING CONCERN BASIS OF PREPARATION indications of fraud throughout the audit. The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have As required by auditing standards, we perform procedures to address the risk of management concluded that the Group and the Company’s financial position means that this is realistic for at override of controls, in particular the risk that Group and component management may be in a least a year from the date of approval of the financial statements (‘the going concern period’). position to make inappropriate accounting entries and the risk of bias in accounting estimates As stated in section 2 of our report, they have also concluded that there is a material uncertainty and judgements such as the valuation of the estate, valuation of derivatives and pension related to going concern. assumptions. On this audit we do not believe there is a fraud risk related to revenue recognition because Group revenue is generated mainly from retail through the operation of pubs. Retail An explanation of how we evaluated management’s assessment of going concern is set out in revenue contains no significant judgements, and is comprised of a large number of small, simple section 2 of our report. transactions that are received in cash or credit card receivables at the point of sale. Therefore, Our conclusions based on this work: there is limited opportunity for management manipulation or to fraudulently post the volume of transactions that would be required to have a material impact on revenue. • We consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; In determining the audit procedures we took into account the results of our evaluation and testing of the operating effectiveness and the design of some of the Group-wide fraud risk • We have nothing material to add or draw attention to in relation to the Directors’ statement management controls. Refer to page 72 of the Audit Committee report. in Note 1 to the financial statements on the use of the going concern basis of accounting, and their identification therein of a material uncertainty over the Group and Company’s We performed procedures including: ability to continue to use that basis for the going concern period; and • Identifying journal entries to test based on risk criteria and comparing the identified entries • The related statement under the Listing Rules set out on page 99 is materially consistent with to supporting documentation. These included journal entries made to unusual accounts the financial statements and our audit knowledge. related to revenue, cash and loans and borrowings. ### 6. FRAUD AND BREACHES OF LAWS AND REGULATIONS – Identifying and responding to risks of material misstatement due to non- ### ABILITY TO DETECT compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material Identifying and responding to risks of material misstatement due to fraud effect on the financial statements from our general commercial and sector experience, through To identify risks of material misstatement due to fraud (‘fraud risks’) we assessed events or discussion with the Directors and other management as required by auditing standards and conditions that could indicate an incentive or pressure to commit fraud or provide an discussed with the Directors and other management the policies and procedures regarding opportunity to commit fraud. Our risk assessment procedures included: compliance with laws and regulations. • Enquiring of Directors, the Audit Committee, internal audit and inspection of policy We communicated identified laws and regulations throughout our team and remained alert documentation as to the Group’s/Company’s high-level policies and procedures to prevent to any indications of non- compliance throughout the audit. and detect fraud, including the internal audit function, and the Group’s/Company’s The potential effect of these laws and regulations on the financial statements varies considerably. channel for ‘whistleblowing’, as well as whether they have knowledge of any actual, suspected or alleged fraud. Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable • Reading board, Audit Committee and remuneration committee minutes. profits, pensions legislation and taxation legislation, and we assessed the extent of compliance • Considering remuneration incentive schemes and performance targets. with these laws and regulations as part of our procedures on the related financial • Using analytical procedures to identify any unusual or unexpected relationships. statementitems. • Considering the existence of any significant unusual transactions. 104 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED ### 6. FRAUD AND BREACHES OF LAWS AND REGULATIONS – 7. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE ### ABILITYTODETECT CONTINUED ANNUAL REPORT Secondly, the Group is subject to many other laws and regulations where the consequences The Directors are responsible for the other information presented in the Annual Report together ofnon-compliance could have a material effect on amounts or disclosures in the financial with the financial statements. Our opinion on the financial statements does not cover the other statements, for instance through the imposition of fines or litigation or the loss of the Group’s information and, accordingly, we do not express an audit opinion or, except as explicitly licence to operate. We identified the following areas as those most likely to have such an effect: stated below, any form of assurance conclusion thereon. the Pubs Code, health and safety, GDPR compliance, anti-bribery, employment law, Payment Our responsibility is to read the other information and, in doing so, consider whether, based on Card Industry compliance, money laundering, environmental protection, consumer rights, our financial statements audit work, the information therein is materially misstated or inconsistent misrepresentation, market abuse legislation and certain aspects of company legislation with the financial statements or our audit knowledge. Based solely on that work we have not recognising the nature of the Group’s activities. Auditing standards limit the required audit identified material misstatements in the other information. procedures to identify non- compliance with these laws and regulations to enquiry of the Directors and other management and inspection of regulatory and legal correspondence, Strategic report and Directors’ report ifany. Therefore if a breach of operational regulations is not disclosed to us or evident from Based solely on our work on the other information: relevant correspondence, an audit will not detect that breach. • we have not identified material misstatements in the strategic report and the directors’ report; We discussed with the Audit Committee matters related to actual or suspected breaches of laws or regulations, for which disclosure is not necessary, and considered any implications for our audit. • in our opinion the information given in those reports for the financial period is consistent with the financial statements; and Context of the ability of the audit to detect fraud or breaches of law or regulation • in our opinion those reports have been prepared in accordance with the Companies Act 2006. Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly Directors’ remuneration report planned and performed our audit in accordance with auditing standards. For example, the In our opinion the part of the Directors’ Remuneration Report to be audited has been properly further removed non-compliance with laws and regulations is from the events and transactions prepared in accordance with the Companies Act 2006. reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. Disclosures of emerging and principal risks and longer-term viability In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these We are required to perform procedures to identify whether there is a material inconsistency may involve collusion, forgery, intentional omissions, misrepresentations, or the override of between the Directors’ disclosures in respect of emerging and principal risks and the viability internal controls. Our audit procedures are designed to detect material misstatement. We are statement, and the financial statements and our audit knowledge. not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 105 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED ### 7. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION Corporate governance disclosures IN THE ANNUAL REPORT CONTINUED We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ corporate governance disclosures and the financial statements and Based on those procedures, other than the material uncertainty related to going concern our audit knowledge. referred to above, we have nothing further material to add or draw attention to in relation to: Based on those procedures, we have concluded that each of the following is materially • the Directors’ confirmation within the Viability Statement (page 58) that they have carried consistent with the financial statements and our audit knowledge: out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity; • the Directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable, and provides the information • the Principal Risks disclosures describing these risks and how emerging risks are identified, necessary for shareholders to assess the Group’s position and performance, business and explaining how they are being managed and mitigated; and modeland strategy; • the Directors’ explanation in the Viability Statement of how they have assessed the prospects • the section of the annual report describing the work of the Audit Committee, including the of the Group, over what period they have done so and why they considered that period to significant issues that the Audit Committee considered in relation to the financial be appropriate, and their statement as to whether they have a reasonable expectation that statements, and how these issues were addressed; and the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any • the section of the annual report that describes the review of the effectiveness of the necessary qualifications or assumptions. Group’s risk management and internal control systems. We are also required to review the Viability Statement set out on page 55 under the Listing We are required to review the part of the Corporate Governance Statement relating to the Rules. Based on the above procedures, we have concluded that the above disclosures are Group’s compliance with the provisions of the UK Corporate Governance Code specified by materially consistent with the financial statements and our audit knowledge. the Listing Rules for our review. We have nothing to report in this respect. Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we cannot predict all future events or conditions and 8. WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS ON as subsequent events may result in outcomes that are inconsistent with judgements that were WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION reasonable at the time they were made, the absence of anything to report on these Under the Companies Act 2006, we are required to report to you if, in our opinion: statements is not a guarantee as to the Group’s and Company’s longer-term viability. • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. 106 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED ### 9. RESPECTIVE RESPONSIBILITIES 10. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE ### OWEOUR RESPONSIBILITIES Directors’ responsibilities This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 As explained more fully in their statement set out on page 98, the Directors are responsible for: of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might the preparation of the financial statements including being satisfied that they give a true and state to the Company’s members those matters we are required to state to them in an auditor’s fair view; such internal control as they determine is necessary to enable the preparation of report and for no other purpose. To the fullest extent permitted by law, we do not accept or financial statements that are free from material misstatement, whether due to fraud or error; assume responsibility to anyone other than the Company and the Company’s members, assessing the Group and parent Company’s ability to continue as a going concern, disclosing, asabody, for our audit work, for this report, or for the opinions we have formed. as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to JOHN LEECH cease operations, or have no realistic alternative but to do so. (SENIOR STATUTORY AUDITOR) Auditor’s responsibilities for and on behalf of KPMG LLP, Statutory Auditor Our objectives are to obtain reasonable assurance about whether the financial statements as Chartered Accountants a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not One Snowhill guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material Snow Hill Queensway Birmingham misstatement when it exists. Misstatements can arise from fraud or error and are considered B4 6GH material if, individually or in aggregate, they could reasonably be expected to influence the 8 December 2022 economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 107 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### GROUP INCOME STATEMENT For the 52 weeks ended 1 October 2022 2022 2021 | | | | | | Non- | | | | | | | Non- | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 1 | | | | | | | 1 | | | | | | underlying | | | | | | | underlying | | | | | | | Underlying | | | (note 4) | | | Total | Underlying | | | (note 4) | | | Total | | Note | | £m | | | £m | | £m | | £m | | | £m | | £m | Continuing operations Revenue 3 799.6 – 799.6 401.7 – 401.7 Operating expenses 3 (684.2) 26.7 (657.5) (396.0) (96.2) (492.2) Income/(loss) from associates 12 3.3 – 3.3 (14.5) – (14.5) Operating profit/(loss) 4 118.7 26.7 145.4 (8.8) (96.2) (105.0) Finance costs 6 (91.9) – (91.9) (93.4) (2.0) (95.4) Finance income 6 0.9 0.5 1.4 0.9 – 0.9 Interest rate swap movements 4, 6 – 109.2 109.2 – 8.4 8.4 Contingent consideration fair value movement 4, 6 – (0.7) (0.7) – 20.0 20.0 Net finance (costs)/income 4, 6 (91.0) 109.0 18.0 (92.5) 26.4 (66.1) Profit/(loss) before taxation 27.7 135.7 163.4 (101.3) (69.8) (171.1) Taxation 4, 7 (0.2) (26.0) (26.2) 15.1 27.7 42.8 Profit/(loss) for the period from continuing operations 27.5 109.7 137.2 (86.2) (42.1) (128.3) Discontinued operations Profit for the period from discontinued operations 8 – – – 1.7 289.4 291.1 Profit/(loss) for the period attributable to equity shareholders 27.5 109.7 137.2 (84.5) 247.3 162.8 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. 108 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # **GROUP INCOME STATEMENT CONTINUED** For the 52 weeks ended 1 October 2022 | Earnings/(loss) per share: | Note | 2022 p | 2021 | | --- | --- | --- | --- | | Basic earnings/(loss) per share | 9 | | | | Total | | 21.7 | 25. | | Continuing | | 21.7 | (20. | | Discontinued | | – | 46. | | Basic underlying earnings/(loss) per share | 9 | | | | Total | | 4.3 | (13. | | Continuing | | 4.3 | (13. | | Discontinued | | – | 0. | | Diluted earnings/(loss) per share | 9 | | | | Total | | 21.4 | 25. | | Continuing | | 21.4 | (20. | | Discontinued | | – | 46. | | Diluted underlying earnings/(loss) per share | 9 | | | | Total | | 4.3 | (13. | | Continuing | | 4.3 | (13. | | Discontinued | | – | 0. | MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # **GROUP STATEMENT OF COMPREHENSIVE INCOME** For the 52 weeks ended 1 October 2022 | | 2022 £m | 2021 £m | | --- | --- | --- | | Profit for the period | 137.2 | 162.1 | | **Items of other comprehensive income that may subsequently be reclassified to profit or loss** | | | | Gains arising on cash flow hedges | 23.9 | 5.1 | | Transfers to the income statement on cash flow hedges | 17.0 | 19.1 | | Other comprehensive expense of associates | (0.8) | | | Tax on items that may subsequently be reclassified to profit or loss | (10.2) | 1.1 | | | 29.9 | 27.1 | | **Items of other comprehensive income that will not be reclassified to profit or loss** | | | | Remeasurement of retirement benefits | 23.3 | 17.1 | | Unrealised surplus on revaluation of properties | 105.8 | 59.1 | | Reversal of past revaluation surplus | (34.3) | (105.8) | | Tax on items that will not be reclassified to profit or loss | (20.5) | (12.1) | | | 74.3 | (40.1) | | Other comprehensive income/(expense) for the period | 104.2 | (13.1) | | **Total comprehensive income for the period attributable to equity shareholders** | **241.4** | **149.1** | 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. 110 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # GROUP CASH FLOW STATEMENT For the 52 weeks ended 1 October 2022 | | Note | 2022 £m | 2021 £m | | --- | --- | --- | --- | | **Operating activities** | | | | | Profit for the period | | 137.2 | 162. | | Taxation | | 26.2 | (43. | | Net finance (income)/costs | | (18.0) | 66. | | Depreciation and amortisation | | 44.2 | 42. | | Gain on disposal of subsidiary | | – | (290. | | Working capital movement | 31 | (31.8) | (6. | | Non-cash movements | 31 | (30.4) | 100. | | (Decrease)/increase in provisions and other non-current liabilities | | (7.0) | 2. | | Difference between defined benefit pension contributions paid and amounts charged | | (7.3) | (7. | | Dividends from associates | | 19.4 | – | | Income tax received | | 1.5 | 7. | | **Net cash inflow from operating activities** | | **134.0** | **34.** | | **Investing activities** | | | | | Interest received | | 0.9 | 0. | | Sale of property, plant and equipment and assets held for sale | | 9.9 | 16. | | Purchase of property, plant and equipment and intangible assets | | (70.1) | (46. | | Disposal of subsidiary | 8 | 28.2 | 228. | | Movement in trade loans | | – | 0. | | Finance lease capital repayments received | | 2.7 | 1. | | Net transfer from/(to) other cash deposits | 30 | 0.2 | (1. | | **Net cash (outflow)/inflow from investing activities** | | **(28.2)** | **198.** | | **Financing activities** | | | | | Interest paid | | (79.4) | (96. | | Swap termination costs | | – | (19. | | Proceeds from sale of own shares | | – | 0. | | Repayment of securitised debt | | (37.4) | (35. | | Advance/(repayment) of bank borrowings | | 25.0 | (80. | | Net repayments of lease liabilities | | (8.5) | (19. | | (Repayment)/advance of other borrowings | | (10.0) | 10. | | **Net cash outflow from financing activities** | | **(110.3)** | **(241.** | | **Net decrease in cash and cash equivalents** | 30 | **(4.5)** | **(8.** | 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. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### GROUP BALANCE SHEET As at 1 October 2022 | | 1 October | | 2 October | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Note | | £m | | £m | Non-current assets Intangible assets 10 35.1 36.1 Property, plant, and equipment 11 2,111.0 1,984.2 Interests in associates 12 260.3 277.4 Other non-current assets 13 17.9 15.9 Deferred tax assets 14 – 47.6 Retirement benefit surplus 15 15.1 – Derivative financial instruments 16 1.8 – 2,441.2 2,361.2 Current assets Derivative financial instruments 16 3.3 – Inventories 17 12.6 12.9 Trade and other receivables 18 30.1 52.3 Current tax assets – 1.0 Other cash deposits 3.0 3.2 Cash and cash equivalents 27.7 32.2 76.7 101.6 Assets held for sale 19 4.8 5.1 81.5 106.7 Current liabilities Borrowings 20 (64.1) (67.5) Trade and other payables 22 (204.4) (220.7) Current tax liabilities (1.2) – Provisions for other liabilities and charges 23 (1.0) (1.5) (270.7) (289.7) Non-current liabilities Borrowings 20 (1,560.6) (1,571.8) Derivative financial instruments 16 (25.5) (170.5) Other non-current liabilities 24 (6.5) (5.5) Provisions for other liabilities and charges 23 (3.3) (9.6) Deferred tax liabilities 14 (8.0) – Retirement benefit obligations 15 – (14.4) (1,603.9) (1,771.8) Net assets 648.1 406.4 112 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### GROUP BALANCE SHEET CONTINUED As at 1 October 2022 | | 1 October | | 2 October | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Note | | £m | | £m | Shareholders’ equity Equity share capital 28 48.7 48.7 Share premium account 334.0 334.0 Revaluation reserve 417.1 360.5 Capital redemption reserve 29 6.8 6.8 Hedging reserve (50.7) (81.4) Own shares 29 (110.9) (111.1) Retained earnings 3.1 (151.1) Total equity 648.1 406.4 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 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 113 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # 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 2021 | 48.7 | 334.0 | 360.5 | 6.8 | (81.4) | (111.1) | (151.1) | 406.7 | | Profit for the period | – | – | – | – | – | – | 137.2 | 137.2 | | Remeasurement of retirement benefits | – | – | – | – | – | – | 23.3 | 23.3 | | 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 | – | 153.9 | 241.1 | | Share-based payments | – | – | – | – | – | – | 0.5 | 0.5 | | 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) | – | – | 0.2 | 0.3 | 0.3 | | **At 1 October 2022** | **48.7** | **334.0** | **417.1** | **6.8** | **(50.7)** | **(110.9)** | **3.1** | **648.7** | Further detail in respect of the Group's equity is provided in notes 28 and 29. 114 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # 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 2020 | 48.7 | 334.0 | 430.6 | 23.7 | 6.8 | (108.7) | (111.9) | (374.3) | 248.7 | | Profit for the period | – | – | – | – | – | – | – | 162.8 | 162.8 | | Remeasurement of retirement benefits | – | – | – | – | – | – | – | 17.5 | 17.5 | | 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 | – | 177.8 | 149.7 | | Share-based payments | – | – | – | – | – | – | – | 1.2 | 1.2 | | Sale of own shares | – | – | – | – | – | – | 0.8 | (0.7) | 0.7 | | Transfer disposals to retained earnings | – | – | (15.1) | (23.7) | – | – | – | 38.8 | 38.8 | | Transfer tax to retained earnings | – | – | 0.7 | – | – | – | – | (0.7) | – | | Changes in equity of associates | – | – | – | – | – | – | – | 6.8 | 6.8 | | Total transactions with owners | – | – | (14.4) | (23.7) | – | – | 0.8 | 45.4 | 45.4 | | **At 2 October 2021** | **48.7** | **334.0** | **360.5** | **–** | **6.8** | **(81.4)** | **(111.1)** | **(151.1)** | **406.5** | Further detail in respect of the Group's equity is provided in notes 28 and 29. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES For the 52 weeks ended 1 October 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: 52 weeks 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 a number 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 of the Group and the Company, which could cost significant doubt over the Group's ability to trade 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 to debt 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 Net Worth is derived from the net assets of that group of companies. There was headroom 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 at 1 October 2022. # New standards continued | IFRS 3 | Business 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 16 | Leases Amendments regarding seller-lessor subsequent measurement in a sale and leaseback transaction | 1 January 2022 | | IFRS 17 | Insurance Contracts New accounting standard | 1 January 2022 | | IAS 1 | Presentation of Financial Statements Amendments regarding the classification of liabilities Amendments regarding the disclosure of accounting policies Amendments in non-current liabilities regarding long-term debt with covenants | 1 January 2022 1 January 2022 1 January 2022 | | IAS 8 | Accounting Policies, Changes in Accounting Estimates and Errors Amendments regarding the definition of accounting estimates | 1 January 2022 | | IAS 12 | Income Taxes Amendments regarding deferred tax on leases and decommissioning obligations | 1 January 2022 | | 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 28 | Investments 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 37 | Provisions, Contingent Liabilities and Contingent Assets Amendments regarding the costs to include when assessing whether a contract is onerous | 1 January 2022 | 116 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 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 be breached 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 ending on or about 30 November 2022 and 31 December 2022 Liquidity covenants and further amendments 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. The Directors have also considered a severe but plausible downside scenario, incorporating a 5% 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 be taken 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 12 months, 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 least 12 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 cost 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 adjustment 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 the Group 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. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 The Group provides accommodation to customers in its public houses and lodges. Revenue ### 1 ACCOUNTING POLICIES CONTINUED from the provision of accommodation is recognised over the period of the customer’s stay. The Group has applied the purchase method in accounting for the acquisition of subsidiaries. Payment of the transaction price is due at the time of the customer’s stay. 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 The Group provides gaming machines for customers to play in its pubs. Revenue from gaming initially at their fair values at the acquisition date. Acquisition costs are expensed as incurred. machines is recognised when the game has been played. Payment of the transaction price is The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable due when the game is played. net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value In respect of its franchised arrangements, where the Group controls the above goods or of the Group’s share of the identifiable net assets of the subsidiary acquired, the difference is services before those goods or services are transferred to the customer, the associated recognised immediately in the income statement. income is included within the Group’s revenue. When the Group loses control of a subsidiary the carrying amounts of the assets and liabilities Wholesale sales – continuing of that subsidiary are derecognised at the date when control is lost. The fair value of the The Group sells drinks to tenants of its licensed properties. Revenue is recognised when the consideration received is recognised alongside any investment retained in the former Group has transferred control of the goods to the customer. This occurs when the goods have subsidiary at the date that control is lost. Any resulting difference is recognised in full as a been delivered to the customer, the customer has obtained legal title to the goods, the Group gainor loss under IFRS 10 ‘Consolidated Financial Statements’. cannot require the return or transfer of the goods and the customer has an unconditional The consolidated financial statements incorporate the results of Marston’s Issuer PLC and its obligation to pay for the goods. parent company, Marston’s Issuer Parent Limited. Marston’s Issuer PLC was set up with the sole The Group has discretion in establishing the price of goods delivered to the customer and the purpose of issuing debt secured on assets owned by the Group. Wilmington Trust SP Services Group is responsible for fulfilling the promise to provide the specified goods. (London) Limited holds the shares of Marston’s Issuer Parent Limited under a declaration of trust A receivable is recognised when the goods are delivered, and payment is due in line with for charitable purposes. The rights provided to the Group through the securitisation give the each customer’s individual credit terms. These terms are all less than one year and as such no Group power over these companies and the ability to use that power to affect its exposure element of financing is considered to be present. tovariable 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 Group’s revenue from contracts with customers in respect of discontinued operations the consolidated financial statements they have been treated as subsidiary undertakings. comprised wholesale sales and contract services. The Group’s interests in associates are accounted for using the equity method. On initial Wholesale sales – discontinued recognition the investment in an associate is recognised at cost and the carrying amount is The Group sold drinks to wholesalers, retailers and other pub operators. Revenue was subsequently increased or decreased to recognise the Group’s share of the profit or loss, other recognised when the Group had transferred control of the goods to the customer. This comprehensive income and changes in equity of the associate after the date of acquisition. occurred when the goods had been delivered to the customer, the customer had obtained The net investment in an associate is impaired and impairment losses are incurred if, and only legal title to the goods, the Group could not require the return or transfer of the goods and the if, there is objective evidence of impairment as a result of events that occurred after the initial customer had an unconditional obligation to pay for the goods. recognition of the net investment which have an impact on the estimated future cash flows Drinks were often sold with retrospective volume discounts based on sales over a defined that can be reliably estimated. 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 and other operating income revenue. A refund liability was recognised within trade and other payables for the volume The Group’s revenue from contracts with customers in respect of continuing operations discounts expected to be paid in respect of sales made prior to the balance sheet date. comprises outlet sales and wholesale sales. Contract services – discontinued Outlet sales – continuing The Group brewed and packaged drinks for customers. Revenue was recognised when the The Group sells food and drink to customers in its pubs. Revenue from the sale of food and Group had transferred control of the goods to the customer. This occurred when the goods drink is recognised when the goods are sold to the customers in the pubs. Payment of the had been delivered to the customer, the customer had obtained legal title to the goods and transaction price is due immediately when the goods are provided to the customer. the customer had an unconditional obligation to pay for the goods. 118 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 1 Details in respect of non-underlying items recognised in the current and prior period ### 1 ACCOUNTING POLICIES CONTINUED areprovided in notes 4 and 8. Material judgements in respect of the classification of non- The Group also transported and delivered goods for customers. Revenue was recognised over 1 underlying items in the current period related to the impairment of freehold and leasehold time as the Group transported the goods; due to the short distances the goods were transported properties and the interest rate swap movements. The impairment of freehold and leasehold this was equivalent to recognising revenue at the point when the goods were delivered to the properties and the interest rate swap valuation movement were considered to be non- required location. 1 underlying as they were significant items that resulted primarily from movements in external Revenue is recorded net of discounts, intra group transactions, VAT and excise duty relating to 1 market variables rather than reflecting the underlying trading performance of the Group. the brewing and packaging of certain products. Intangible assets 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 Intangible assets are carried at cost less accumulated amortisation and any impairment for the effects of a significant financing component if it is expected that payment will be losses. Intangible assets arising on an acquisition are recognised separately from goodwill received within one year. ifthe fair value of these assets can be identified separately and measured reliably. Rental income Amortisation is calculated on a straight-line basis over the estimated useful life of the The Group also includes rent receivable from tenants of its licensed properties within revenue intangible asset. Where the useful life of the asset is considered to be indefinite no annual from continuing operations. This income is recognised in the period to which it relates. 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 Other operating income carrying value of an asset may be impaired. Any impairment of carrying value is charged to Other operating income in the prior period mainly comprised amounts receivable under the the income statement. The useful lives of the Group’s intangible assets are: Coronavirus Job Retention Scheme and COVID-19 assistance grants from local authorities. These are recognised in the period to which they relate. Computer software 5 to 20 years Operating segments Property, plant, and equipment The Group is considered to have one operating segment under IFRS 8 ‘Operating Segments’ • Land and buildings which are either freehold or are in substance freehold assets are and no disclosures are presented. This is in line with the reporting to the chief operating classed as effective freehold land and buildings. This includes leasehold land and buildings decision maker and the operational structure of the business. The measure of profit or loss with a term exceeding 100 years at acquisition/commencement of the lease or where there reviewed by the chief operating decision maker is underlying profit/loss before tax for the total is an option to purchase the freehold at the end of the lease term for a nominal amount. of continuing and discontinued operations. Allother leasehold land and buildings are classed as leasehold land and buildings. • Effective freehold land and buildings are initially stated at cost and subsequently at 1 Non-underlying items valuation. Leasehold land and buildings, plant and machinery and fixtures, fittings, tools 1 and equipment are stated at cost. In order to illustrate the underlying performance of the Group, presentation has been made ofperformance measures excluding those items which it is considered would distort the • Depreciation is charged to the income statement on a straight-line basis to provide for the 1 comparability of the Group’s results. Non-underlying items are defined as those items of cost or valuation of the assets less their residual values over their useful lives. income and expense which, because of the materiality, nature and/or expected infrequency • Land and buildings are depreciated to their residual values over the lower of the lease term of the events giving rise to them, merit separate presentation to enable users of the financial (where applicable) and 50 years. 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 • Plant and machinery and fixtures, fittings, tools and equipment are depreciated over leasehold property estate is an essential and significant area of the business, the threshold for periods ranging from 3 to 15 years. 1 classification of property related items as non-underlying is higher than other items. • 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. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 119 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### 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 ### 1 ACCOUNTING POLICIES CONTINUED have decreased, a reversal of the loss is made if there has been a change in the estimates used Residual values and useful lives are reviewed and adjusted if appropriate at each balance to determine the recoverable amounts since the last impairment loss was recognised. The sheet date. The Group’s effective freehold land and buildings in respect of its pub estate are carrying amount of the asset is increased to its recoverable amount only up to the carrying considered to have a residual value equal to their current valuation and as such no amount that would have resulted, net of depreciation or amortisation, had no impairment loss depreciation is charged on these assets. been recognised for the asset in prior periods. The reversal is recognised in the income statement Effective freehold land and buildings are revalued by qualified valuers on an annual basis unless the asset is carried at a revalued amount. The reversal of an impairment loss on a revalued using open market values so that the carrying value of an asset does not differ significantly asset is recognised in other comprehensive income and increases the revaluation surplus for that from its fair value at the balance sheet date. The annual valuations are determined via asset. However, to the extent that an impairment loss on the same revalued asset was previously third-party inspection of approximately a third of the sites such that all sites are individually recognised in the income statement, the reversal of that impairment loss is recognised in the inspected every three years. Substantially all of the Group’s effective freehold land and income statement. The depreciation charge is adjusted in future periods to allocate the asset’s buildings have been valued by a third-party in accordance with the Royal Institution of revised carrying value, less any residual value, on a systematic basis over its remaining useful life. Chartered Surveyors’ Red Book. These valuations are performed directly by reference to There is no reversal of impairment losses relating to goodwill. observable prices in an active market or recent market transactions on arm’s length terms. Internal valuations are performed on the same basis. Leases For effective freehold land and buildings, revaluation losses are charged to the revaluation At the inception of a contract the Group assesses whether that contract is, or contains, reserve to the extent that a previous gain has been recorded for that effective freehold asset, alease. This is the case if the contract conveys the right to control the use of an identified and thereafter to the income statement. Surpluses on revaluation are recognised in the assetfor a period of time in exchange for consideration. The Group has taken the practical revaluation reserve, except to the extent that they reverse previously charged impairment expedient in paragraph C3 of IFRS 16 ‘Leases’ not to reassess whether an existing contract is losses for an effective freehold asset, in which case the reversal is recorded in the income orcontains a lease at the date of initial application and as such the IFRS 16 definition of a statement. lease has only been applied to contracts which were entered into or amended on or after 29September 2019. 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 The lease term is determined as the non-cancellable period of a lease together with periods value at the end of the reporting period. This is consistent with the requirements of IAS 16 covered by an option to extend the lease if the Group is reasonably certain to exercise that ‘Property, Plant and Equipment’. option and the periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. Disposals of property, plant and equipment The Group has elected not to apply the lessee requirements of IFRS 16 to short-term leases and Profit/loss on disposal of property, plant and equipment represents net sale proceeds less the leases for which the underlying asset is of low value. The lease payments for such leases are carrying value of the assets and any associated lease liabilities. Any element of the revaluation recognised as an expense on a straight-line basis over the lease term. For all other leases reserve relating to the property disposed of is transferred to retained earnings at the date of sale. where it is the lessee the Group recognises a lease liability and a right-of-use asset at the commencement date of the lease. Impairment The lease liability is recognised as the present value of the lease payments discounted using If there are indications of impairment or reversal of impairment, an assessment is made of either the interest rate implicit in the lease or, where that rate cannot be readily determined, therecoverable amount of each significant cash generating unit, which is performed at an the Group’s incremental borrowing rate. The lease payments include variable payments that individual site level. An impairment loss is recognised where the recoverable amount is lower depend on an index or rate and the exercise price of a purchase option if it is reasonably than the carrying value of assets, including goodwill. The recoverable amount is the higher of certain that it will be exercised. The lease liability is subsequently increased to reflect the value in use and fair value less costs to sell. The impairment loss is recognised in the income interest thereon, reduced by the lease payments made and remeasured to reflect any statement unless the asset is carried at a revalued amount, in which case the impairment loss is reassessments or lease modifications, such as a change in future lease payments resulting charged to the revaluation reserve to the extent that a previous gain has been recorded, and froma change in an index or rate or a change in the lease term. thereafter to the income statement. 120 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 1 ACCOUNTING POLICIES CONTINUED Financial instruments The right-of-use asset is recognised at an amount equal to the total of the lease liability, any The Group classifies its financial assets in one of the following two categories: at fair value lease payments made at or before the commencement date, any initial direct costs and the through profit or loss and at amortised cost. The Group classifies its financial liabilities in one of estimated future dismantling, removal, and site restoration costs. The Group has elected to the following two categories: at fair value through profit or loss and other financial liabilities. apply the revaluation model to right-of-use assets relating to the effective freehold land and The Group classifies a financial asset as at amortised cost if the asset is held within a business buildings class of property, plant, and equipment. All other right-of-use assets are held under model whose objective is to hold financial assets in order to collect contractual cash flows and the cost model and subsequently measured at cost less any accumulated depreciation and the contractual terms of the asset give rise on specified dates to cash flows that are solely impairment losses and adjusted for any remeasurement of the lease liability. payments of principal and interest. For assets where the Group is the lessor, leases are classified as finance leases if the terms Financial instruments at fair value through profit or loss ofthe lease transfer substantially all the risks and rewards of ownership to the lessee. All other Derivatives are categorised as financial instruments at fair value through profit or loss unless leases are classified as operating leases. Where the Group is an intermediate lessor of an asset, they are designated as part of a hedging relationship. Contingent consideration is also the sublease is classified as a finance lease or an operating lease by reference to the right-of- categorised as at fair value through profit or loss as it does not give rise on specified dates use asset arising from the head lease rather than the underlying asset. tocash flows that are solely payments of principal and interest. The Group holds no other Income receivable under operating leases is credited to the income statement on a straight- financial instruments at fair value through profit or loss. line basis over the term of the lease. Financial assets at amortised cost Where a sublease is classified as a finance lease the right-of-use asset is derecognised and the Financial assets at amortised cost comprise finance lease receivables, trade receivables, Group recognises a finance lease receivable at an amount equal to the net investment in the other receivables, other cash deposits and cash and cash equivalents in the balance sheet lease. The lease payments are discounted at the interest rate implicit in the lease, or where this and are measured using the effective interest method. cannot be readily determined, the discount rate used for the head lease. Finance income is Other financial liabilities recognised over the lease term based on a pattern reflecting a constant periodic rate of Non-derivative financial liabilities are classified as other financial liabilities. The Group’s other return on the net investment in the lease. financial liabilities comprise borrowings, trade payables and other payables. Other financial Obligations arising from sale and leaseback arrangements with repurchase options that do liabilities are carried at amortised cost using the effective interest method. not fall within the scope of IFRS 16 are classified as other lease related borrowings and Financial assets are derecognised when the rights to receive cash flows from the investments accounted for in accordance with IFRS 9 ‘Financial Instruments’. have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Inventories It is, and has been throughout the period under review, the Group’s policy that no trading in Inventories are stated at the lower of cost and net realisable value and are valued on a ‘first in, financial instruments shall be undertaken. first out’ basis. Derivative financial instruments Assets held for sale The only derivative financial instruments that the Group enters into are interest rate swaps. Thepurpose of these transactions is to manage the interest rate risk arising from the Group’s Assets, typically properties and related fixtures and fittings, are categorised as held for sale operations and its sources of finance. when their value will be recovered through a sale transaction rather than continuing use. This condition is met when the sale is highly probable, the asset is available for immediate sale in its Derivatives are initially recognised at fair value on the date the derivative contract is present condition and is being actively marketed. In addition, the Group must be committed enteredinto and are subsequently remeasured at their fair value at each balance sheet date. to the sale and completion should be expected to occur within one year from the date of The method of recognising the resulting gain or loss depends on whether the derivative is classification. Assets held for sale are valued at the lower of carrying value and fair value less designated as a hedging instrument. costs to sell. Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 121 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 When the interest rate benchmark on which the hedged future cash flows had been based ### 1 ACCOUNTING POLICIES CONTINUED ischanged as required by IBOR reform, for the purpose of determining whether the hedged The effective portion of changes in the fair value of derivatives that are designated and future cash flows are expected to occur, the Group deems that the amount accumulated in qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss the hedging reserve for that hedging relationship is based on the alternative benchmark rate relating to the ineffective portion is recognised immediately in the income statement. on which the hedged future cash flows will be based. Gains or losses arising from changes in the fair value of derivatives which are not designated When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria as part of a hedging relationship are presented in the income statement in the period in which forhedge accounting, any cumulative gain or loss existing in equity at that time remains in they arise. equity and is recognised when the forecast transaction is ultimately recognised in the income At the inception of a hedging transaction, the Group documents the economic relationship statement. When a forecast transaction is no longer expected to occur, the cumulative gain or between hedging instruments and hedged items, as well as its risk management objectives and loss that was reported in equity is immediately transferred to the income statement. strategy for undertaking the hedging transaction. The Group also documents its assessment, Amounts that have been recognised in other comprehensive income in respect of cash flow both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedges are reclassified from equity to profit or loss as a reclassification adjustment in the same hedging transactions are highly effective in offsetting changes in cash flows of hedged items. period or periods during which the hedged forecast cash flow affects profit or loss. For the purpose of evaluating whether there is an economic relationship between the hedged Contingent consideration item and the hedging instrument, the Group assumes that the benchmark interest rate is not Contingent consideration is initially recognised at fair value at the date of disposal and altered as a result of interest rate benchmark reform. For a cash flow hedge of a forecast subsequently remeasured at its fair value at each balance sheet date and upon settlement. transaction and the purpose of assessing whether the forecast transaction is highly probable, the Group assumes that the benchmark interest rate will not be altered as a result of interest Finance lease receivables rate benchmark reform. In determining whether a previously designated forecast transaction Finance lease receivables are recognised at an amount equal to the net investment in the in a discontinued cash flow hedge is still expected to occur, the Group assumes that the lease and subsequently measured at amortised cost less provision for impairment. interest rate benchmark cash flows designated as a hedge will not be altered as a result of Trade receivables and other receivables interest rate benchmark reform. Trade receivables and other receivables are recognised initially at fair value and subsequently The Group ceases to apply these specific policies for assessing the economic relationship measured at amortised cost less provision for impairment. between the hedged item and the hedging instrument and undertaking its highly probable The Group applies the expected credit loss model to calculate any loss allowance for finance assessment of the forecast cash flows when the uncertainty arising from interest rate lease receivables, trade receivables and other receivables. For finance lease receivables, benchmark reform regarding the timing and the amount of the interest rate benchmark- trade receivables and other receivables that result from transactions that are within the scope based cash flows is no longer present, or when the hedging relationship is discontinued. of IFRS 15 ‘Revenue from Contracts with Customers’ or from transactions that are within the When the basis for determining the contractual cash flows of the hedged item or hedging scope of IFRS 16 ‘Leases’ the loss allowance is measured as the lifetime expected credit loss. instrument changes as a result of IBOR reform and therefore there is no longer uncertainty For any other trade or other receivables, the loss allowance is measured as the 12-month arising about the cash flows of the hedged item or the hedging instrument, the Group amends expected credit loss unless the credit risk has increased significantly since initial recognition, the formal designation of that hedging relationship to reflect the changes required by IBOR inwhich case the lifetime expected credit losses is used. Details of the methodologies used to reform. For this purpose, the hedge designation is amended only to designate an alternative calculate the expected credit loss for the different groupings of finance lease receivables, benchmark rate as the hedged risk, to update the description of the hedged item or to trade receivables and other receivables are given in note 25. update the description of the hedging instrument. Such an amendment to the formal designation of a hedging relationship does not constitute the discontinuation of the hedgingrelationship or the designation of a new hedging relationship. 122 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 1 ACCOUNTING POLICIES CONTINUED Trade payables and other payables Trade payables and other payables are recognised initially at fair value and subsequently The carrying amount of finance lease receivables, trade receivables and other receivables is measured at amortised cost using the effective interest method. reduced through the use of an allowance account, and the amount of the loss allowance is recognised in the income statement within other operating charges. The Group’s policy is to Employee benefits write off finance lease receivables, trade receivables and other receivables when there is no reasonable expectation of recovery of the balance due. Indicators that there is no reasonable Pension costs for the Group’s defined benefit pension plan are determined by the Projected expectation of recovery depend on the type of debtor/customer and include a debt being Unit Credit Method, with actuarial calculations being carried out at each period end date. over four months old, the failure of the debtor to engage in a repayment plan and the failure Costs are recognised in the income statement within operating expenses and net finance to recover any amounts through enforcement activity. Subsequent recoveries of amounts costs/income. The current service cost, past service cost and gains or losses arising from previously written off are credited against other operating charges in the income statement. settlements are included within operating expenses. The net interest on the net defined benefit asset/liability is included within finance income or costs and the administrative expenses paid Other cash deposits from plan assets are included within finance costs. Cash held on deposit with banks with a maturity of more than three months at the date of acquisition is classified within other cash deposits. Actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are recognised in full in the period in which they occur in the statement of Cash and cash equivalents comprehensive income. The return on plan assets, excluding amounts included in the net interest Cash and cash equivalents include cash in hand and deposits on call with banks. Any bank on the net defined benefit asset/liability, is also recognised in other comprehensive income. overdrafts are shown within borrowings in current liabilities. For the purpose of the cash flow statement, cash and cash equivalents are as defined above, net of outstanding bank overdrafts. The asset/liability recognised in the balance sheet for the defined benefit pension plan is the fair value of plan assets less the present value of the defined benefit obligation. Where the fair Borrowings value of plan assets exceeds the present value of the defined benefit obligation, the Group Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings recognises an asset at the lower of the fair value of plan assets less the present value of the are subsequently stated at amortised cost; any difference between the proceeds (net of defined benefit obligation, and the present value of any economic benefits available in the transaction costs) and the redemption value is recognised in the income statement over the form of refunds from the plan or reductions in future contributions to the plan. The Trust Deed period of the borrowings using the effective interest method. provides the Group with an unconditional right to refund of surplus assets assuming the full If the basis for determining the contractual cash flows of borrowings measured at amortised settlement of the defined benefit obligation in the event of a plan wind up, or otherwise cost changes as a result of interest rate benchmark reform, then the effective interest rate of augment the benefits due to members, of the plan. Based on these rights, any net surplus is the borrowings is updated to reflect the change that is required by the reform. A change in the recognised in full. basis for determining the contractual cash flows is required by interest rate benchmark reform Should contributions payable under a minimum funding requirement not be available as a when the change is necessary as a direct consequence of the reform and the new basis for refund or reduction in future contributions after they are paid into the plan, a liability would be determining the contractual cash flows is economically equivalent to the previous basis. recognised to this extent when the obligation arose. Preference shares are classified as liabilities. The dividends on these preference shares are Pension costs for the Group’s defined contribution pension plans are charged to the income recognised in the income statement as finance costs. statement in the period in which they arise. Borrowing costs are recognised as an expense in the period in which they are incurred, except Post-retirement medical benefits are accounted for in an identical way to the Group’s defined for interest costs incurred on the financing of major projects, which are capitalised until the benefit pension plan. time that the projects are available for use. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 123 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 Non-vesting conditions are considered when determining the fair value of the Group’s ### 1 ACCOUNTING POLICIES CONTINUED share-based payments, and all cancellations of share-based payments, whether by the Key management personnel Group or by employees, are accounted for in an identical manner with any costs unrecognised at the date of cancellation being immediately accelerated. Key management personnel are those who have authority and responsibility for planning, directing, and controlling the activities of the Group. In the case of Marston’s PLC, the key Own shares management personnel are the Directors of the Group and as such the Directors are related parties of the Group. Own shares comprise treasury shares, and shares held on trust for employee share schemes, which are used for the issuing of shares to applicable employees. Own shares are recognised Current and deferred tax at cost as a deduction from shareholders’ equity. Subsequent consideration received for the sale of such shares is also recognised in equity, with any difference between the sale proceeds The current tax charge is calculated on the basis of the tax laws enacted or substantively and the original cost being taken to equity. No income or expense is recognised in the enacted at the balance sheet date and is measured at the amount expected to be paid to, performance statements on own share transactions. or recovered from, the tax authorities. Deferred tax is provided in full, using the liability method, on all differences that have Dividends originated but not reversed by the balance sheet date, and which give rise to an obligation to Dividends proposed by the Board but unpaid at the period end are recognised in the financial pay more or less tax in the future. Differences are defined as the differences between the statements when they have been approved by the shareholders. Interim dividends are carrying value of assets and liabilities and their tax base. recognised when paid. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the assets can be utilised. Transactions and balance sheet items in a foreign currency Deferred tax is calculated using tax rates that are expected to apply when the related Transactions in a foreign currency are translated to sterling using the exchange rate at the date deferred tax asset is realised, or the deferred tax liability is settled. of the transaction. Monetary receivables and payables are remeasured at closing day rates at each balance sheet date. Exchange gains or losses that arise from such remeasurement and on Provisions settlement of the transaction are recognised in the income statement. Translation differences for non-monetary assets valued at fair value through profit or loss are reported as part of the fair Provisions are recognised in the balance sheet when the Group has a present legal or value gain or loss. Gains or losses on disposal of non-monetary assets are recognised in the constructive obligation as a result of a past event and it is probable that an outflow of income statement. economic benefits will be required to settle the obligation. These provisions are measured at the present value of the expenditure expected to be Government grants required to settle the obligation using a pre-tax rate that reflects current market assessments Government grants are recognised when there is reasonable assurance the grants will be ofthe time value of money and the risks specific to the obligation for which the estimates of received, and the conditions of the grant will be complied with. Income from government future cash flows have not been adjusted. grants is included within other operating income. Share-based payments The fair value of share-based remuneration at the date of grant is calculated using the Black-Scholes option-pricing model and charged to the income statement on a straight-line basis over the vesting period of the award. The charge to the income statement takes account of the estimated number of shares that will vest. 124 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 1 ACCOUNTING POLICIES CONTINUED # Key estimates and significant judgements Under IFRS the Group is required to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The Group's key assumptions and significant judgements are in respect of non-underlying items, property, plant and equipment, retirement benefits and financial instruments. Further details are provided in the relevant accounting policy or detailed note to the financial statements. The following are the critical judgements, apart from those involving estimates (which are dealt with separately below), that the Directors have made in the process of applying the Group's accounting policies and that have had the most significant effect on the amounts recognised in the financial statements: # Non-underlying items - Determination of items to be classified as non-underlying (see accounting policy). The following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities: # Property, plant, and equipment - Valuation of effective freehold land and buildings (note 11). # Retirement benefits - Actuarial assumptions in respect of the defined benefit pension plan, which include discount rates, rates of increase in pensions, inflation rates and life expectancies (note 15). # Financial instruments - Valuation of derivative financial instruments (note 25). 1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary on page 167. # 2 SEGMENT REPORTING Following the disposal of the Group's brewing operations in October 2020, 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. # Geographical areas Revenue generated outside the UK during the period was £nil (2021: £0.9 million). This related wholly to discontinued operations. All of the Group's assets are located in the UK. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 # 3 REVENUE AND OPERATING EXPENSES | Revenue | 2022 £m | 2021 £m | | --- | --- | --- | | Outlet sales | 757.2 | 376.0 | | Wholesale sales | 31.6 | 20.0 | | Revenue from contracts with customers | 788.8 | 396.0 | | Rental income | 10.8 | 5.0 | | Total revenue from continuing operations | 799.6 | 401.0 | | Operating expenses | 2022 £m | 2021 £m | | --- | --- | --- | | Change in stocks of finished goods | 0.9 | (2.0) | | Own work capitalised | (0.8) | (0.8) | | Other operating income | (9.6) | (58.0) | | Raw materials and consumables | 205.9 | 105.0 | | Depreciation of property, plant, and equipment | 39.8 | 38.0 | | Amortisation of intangible assets | 4.4 | 3.0 | | Employee costs | 214.0 | 183.0 | | Impairment (reversal) of freehold and leasehold properties | (21.9) | 83.0 | | Other operating charges | 224.8 | 137.0 | | Operating expenses for continuing operations | 657.5 | 492.0 | Government grants of £1.3 million (2021: £10.9 million) in respect of COVID-19 assistance from local authorities are included within other operating income from continuing operations. In prior period, Government grants of £43.5 million in respect of the Coronavirus Job Retention Scheme were included in other operating income from continuing operations. Other operating charges primarily relate to pub overheads and administration costs. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 1 ### 3 REVENUE AND OPERATING EXPENSES CONTINUED 4 NON-UNDERLYING ITEMS 1 The amounts included in the line items above which have been classified as non-underlying 2022 2021 are as follows: £m £m 1 | | | | Non-underlying | operating items | | | --- | --- | --- | --- | --- | --- | | | 2022 | 2021 | | | | | | £m | £m | Reorganisation and restructuring costs – 1.0 | | | | Raw materials and consumables – 0.1 | | | Impairment (reversal) of freehold and leasehold properties (21.6) 83.9 | | | | Employee costs – 1.7 | | | Past service cost in respect of Guaranteed Minimum Pension equalisation – 0.5 | | | | Impairment (reversal) of freehold and leasehold properties (21.9) 83.5 | | | Impact of COVID-19 – 10.8 | | | | Other operating (income)/charges (4.8) 10.9 | | | VAT claims (5.1) – | | | | | (26.7) 96.2 | | | | (26.7) 96.2 | 1 Non-underlying non-operating items Fees payable to the Company’s Auditor were as follows: Net interest on net defined benefit asset/liability – 0.6 2022 2021 Interest on VAT claims (0.5) – KPMG LLP fees: £m £m COVID-19 financing costs – 1.4 Fees payable to the Company’s Auditor for the audit of the Company’s | annual accounts 0.3 0.2 | Interest rate swap movements (109.2) (8.4) | | | | --- | --- | --- | --- | | Fees payable to the Company’s Auditor for other services to the Group: | Contingent consideration fair value movement 0.7 (20.0) | | | | The audit of the Company’s subsidiaries 0.3 0.2 | | | (109.0) (26.4) | | Audit related assurance services 0.1 0.1 | | 1 | | | | Total non-underlying | items for continuing operations (135.7) 69.8 | | 0.7 0.5 1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary on page 167. Reorganisation and restructuring costs Following the disposal of the Group’s brewing business, and in light of the continuing impact ofthe COVID-19 outbreak in the prior period, the Group undertook a central restructuring exercise in the prior period as part of a full review of its overhead costs. Impairment of freehold and leasehold properties At 3 July 2022 the Group’s effective freehold properties were revalued by independent chartered surveyors on an open market value basis. The Group also undertook an impairment review of its leasehold properties in the current period. 126 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 1 COVID-19 financing costs ### 4 NON-UNDERLYING ITEMS CONTINUED As a result of the COVID-19 outbreak and the consequential impact on its trading ability, the The revaluation and impairment adjustments in respect of the above were recognised in the Group obtained certain waivers from its lenders, primarily in respect of covenants. The costs revaluation reserve or income statement as appropriate. The amount recognised in the 1 related to this were classified as a non-underlying item in the prior period. income statement comprises: Interest rate swap movements 2022 2021 The Group’s interest rate swaps are revalued to fair value at each balance sheet date. £m £m Forinterest rate swaps which were designated as part of a hedging relationship a gain of Impairment of property, plant and equipment (note 11) 48.2 104.0 £23.9million (2021: £5.9 million) has been recognised in the hedging reserve in respect of the Reversal of past impairment of property, plant, and equipment (note 11) (69.8) (22.3) effective portion of the fair value movement and £6.2 million (2021: £7.2 million) has been Impairment of assets held for sale (note 19) 0.3 1.8 reclassified from the hedging reserve to underlying finance costs in the income statement in respect of the cash paid in the period. The ineffective portion of the fair value movement has Reversal of impairment of assets held for sale (note 19) (0.6) – been recognised within the income statement. The cash paid of £1.5 million (2021: £1.6 million) Valuation fees 0.3 0.4 has been recognised within underlying finance costs to ensure that underlying finance costs (21.6) 83.9 reflect the resulting fixed rate paid on the associated debt. The remainder of the ineffective portion of the fair value movement, a gain of £0.2 million (2021: loss of £0.8 million), has been Past service cost in respect of Guaranteed Minimum Pension equalisation 1 recognised within non-underlying items. In addition, £10.8 million (2021: £12.5 million) of the On 26 October 2018 a High Court ruling indicated that Guaranteed Minimum Pensions must be balance remaining in the hedging reserve in respect of discontinued cash flow hedges has equalised for men and women. On 20 November 2020 a further High Court ruling indicated that 1 been reclassified to the income statement within non-underlying items. historic cash equivalent transfer values that were calculated on an unequalised basis should be For interest rate swaps which were not designated as part of a hedging relationship the topped up if an affected member makes a successful claim. This additional requirement was fairvalue movement has been recognised within the income statement. The cash paid of reflected in the calculation of the Group’s net defined benefit asset/liability in the prior period 1 £8.6million (2021: £11.6 million) has been recognised within underlying finance costs to ensure and the resulting additional past service cost of £0.5 million was classified as a non-underlying that underlying finance costs reflect the resulting fixed rate paid on the associated debt. The item in the prior period. remainder of the fair value movement, a gain of £119.8 million (2021: £24.0 million), equal to the Impact of COVID-19 change in the carrying value of the interest rate swaps in the period has been recognised In order to mitigate the spread of COVID-19 the UK government implemented various operating 1 within non-underlying items. restrictions in the hospitality industry, such as pub closures, reduced opening times and social The Group terminated one of its interest rate swaps in the prior period resulting in a loss of distancing measures. These had a significant impact on the Group’s business and its customers. 1 £2.3million which was recognised within non-underlying items. Certain associated costs/charges, which primarily comprised bad debt and lease related 1 provisions, contract penalties and stock write-offs, were classified as a non-underlying item in the Contingent consideration fair value movement prior period. Details of government grants received in respect of COVID-19 are provided in note 3. The contingent consideration on the disposal of Marston’s Beer Company Limited was initially recognised at its fair value at the date of disposal and was subsequently remeasured at its fair VAT claims value at 2 October 2021 and the date of settlement during the current period. The movement The Group has submitted claims to HM Revenue & Customs (HMRC) in respect of the VAT 1 in fair value has been recognised within non-underlying items. treatment of gaming machines from 1 January 2006 to 31 January 2013. Following detailed information gathering to support the claims made the Group has recognised the estimated Impact of taxation 1 amounts receivable, including interest, in the current period. The current tax charge relating to the above non-underlying items amounts to £1.4 million 1 (2021: £nil). The deferred tax charge relating to the above non-underlying items amounts to Net interest on net defined benefit asset/liability 1 £24.6 million (2021: credit of £7.9 million). In addition, there is a non-underlying deferred tax The net interest on the net defined benefit asset/liability in respect of the Group’s defined credit of £nil (2021: £19.8 million) in relation to the change in corporation tax rate. benefitpension plan was a charge of £0.2 million (2021: £0.6 million) (note 15). In the prior | | 1 | | 1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary | | | --- | --- | --- | --- | --- | | periodthis charge was recognised within non-underlying | items. In the current period, the Group | | | | | | | 1 | | on page 167. | determined that this charge no longer met the criteria to be recognised within non-underlying 1 items and the current period charge has been presented within underlying items. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 127 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 | 5 EMPLOYEES | | | 6 FINANCE COSTS AND INCOME | | | | --- | --- | --- | --- | --- | --- | | | 2022 | 2021 | | 2022 | 2021 | | Employee costs | £m | £m | | £m | £m | | Wages and salaries 191.7 166.5 | | | Finance costs | | | | Social security costs 15.5 13.4 | | | Bank borrowings 12.5 11.0 | | | | Pension costs 6.3 6.6 | | | Securitised debt 35.0 37.4 | | | | Share-based payments 0.5 1.2 | | | Lease liabilities 18.9 17.7 | | | | Termination costs – 1.2 | | | Other lease related borrowings 21.3 21.1 | | | Other interest payable and similar charges 4.2 6.2 Employee costs 214.0 188.9 Employee costs for discontinued operations – (5.0) 91.9 93.4 1 Employee costs for continuing operations 214.0 183.9 Non-underlying finance costs Net interest on net defined benefit asset/liability – 0.6 1 A non-underlying charge of £1.7 million was included in employee costs for continuing COVID-19 financing costs – 1.4 operations in the prior period. – 2.0 | | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | --- | | Average monthly number of employees | Number | | Number | | Total finance costs 91.9 95.4 | | Bar staff 10,783 9,578 | | | | | Finance income | | Management, administration and production 1,370 1,511 | | | | | Finance lease and other interest receivable (0.9) (0.9) | (0.9) (0.9) 2022 2021 1 Key management personnel compensation £m £m Non-underlying finance income Interest on VAT claims (0.5) – Short-term employee benefits 1.5 1.6 | Termination benefits – 0.1 | | | (0.5) – | | --- | --- | --- | --- | | Share-based payments 0.3 0.4 | | Total finance income (1.4) (0.9) | | | | 1.8 2.1 | Interest rate swap movements | | Hedge ineffectiveness on cash flow hedges (net of cash paid) (0.2) 0.8 Key management personnel have been defined as the Board of Marston’s PLC, including the Change in carrying value of interest rate swaps (119.8) (24.0) Executive Directors. Members of the Board are set out on page 58 of the Annual Report and Accounts 2022. Details of remuneration for Directors, including the highest paid Director, are Transfer of hedging reserve balance in respect of discontinued hedges 10.8 12.5 presented in the Annual Report on Remuneration on pages 87 to 94. Loss on termination of interest rate swaps – 2.3 1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary (109.2) (8.4) on page 167. Contingent consideration fair value movement Contingent consideration fair value movement 0.7 (20.0) 0.7 (20.0) Net finance (income)/costs for continuing operations (18.0) 66.1 128 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 The actual tax rate for the period is lower (2021: higher) than the standard rate of corporation ### 7 TAXATION tax of 19% (2021: 19%). The differences are explained below: | | 2022 | 2021 | | | | | --- | --- | --- | --- | --- | --- | | Income statement | £m | £m | | 2022 | 2021 | | | | | Tax reconciliation | £m | £m | Current tax Profit/(loss) before tax from continuing operations 163.4 (171.1) Current period 0.2 – Adjustments in respect of prior periods (0.3) (0.5) 1 Charge in respect of tax on non-underlying items 1.4 – Profit/(loss) before tax multiplied by the corporation tax rate of 19% (2021: 19%) 31.0 (32.5) Effect of: 1.3 (0.5) Adjustments in respect of prior periods (0.1) (0.5) Deferred tax Change in deferred tax asset not recognised (8.5) 9.0 Current period 0.1 (14.6) Net deferred tax credit in respect of land and buildings (1.8) (2.6) Adjustments in respect of prior periods 0.2 – Costs not deductible for tax purposes – 0.8 1 Charge/(credit) in respect of tax on non-underlying items 24.6 (7.9) Share of (income)/loss of associate (0.6) 2.8 1 Non-underlying credit in relation to the change in tax rate – (19.8) Other amounts on which tax relief is available (2.4) – 24.9 (42.3) Difference between deferred and current tax rates 8.6 – Taxation charge/(credit) for continuing operations reported in the income Impact of change in tax rate – (19.8) statement 26.2 (42.8) Taxation charge/(credit) for continuing operations 26.2 (42.8) 2022 2021 Statement of comprehensive income £m £m The March 2021 Budget announced that the main rate of corporation tax would change from 19% to 25% with effect from 1 April 2023. This change was substantively enacted on 24 May Remeasurement of retirement benefits 5.8 2.5 2021. This will increase the Group’s future current tax charge accordingly. The deferred tax Impairment and revaluation of properties 14.7 9.8 assets and liabilities at 1 October 2022 have been calculated at 25% (2021: 25%). Hedging reserve movements 10.2 (1.7) Taxation charge reported in the statement of comprehensive income 30.7 10.6 1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary on page 167. A deferred tax charge of £nil (2021: £8.4 million) relating to the change in corporation tax rate has been recognised in the statement of comprehensive income and is included in the aboveamounts. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 129 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 8 DISCONTINUED OPERATIONS On 4 October 2020 the Group transferred its brewing operations into a wholly owned subsidiary, Marston's Beer Company Limited. On 30 October 2020 the Group sold Marston's Beer Company Limited to Carlsberg Marston's Limited (formerly Carlsberg Marston's Brewing Company Limited) in exchange for a cash receipt of £232.4 million, contingent consideration of up to £34.0 million and a 40% shareholding in Carlsberg Marston's Limited (formerly Carlsberg Marston's Brewing Company Limited). # Results of discontinued operations | | 2021 | | | | --- | --- | --- | --- | | | Underlying £m | Non- underlying £m | Total £m | | Revenue | 22.1 | – | 22.1 | | Operating expenses | (20.7) | (1.4) | (22.1) | | **Operating profit/(loss)** | **1.4** | **(1.4)** | **–** | | Net finance costs | (0.1) | – | (0.1) | | **Profit/(loss) before taxation** | **1.3** | **(1.4)** | **(0.1)** | | Taxation | 0.4 | 0.3 | 0.7 | | **Profit/(loss) after taxation** | **1.7** | **(1.1)** | **0.6** | | Gain on disposal of discontinued operations | – | 290.5 | 290.5 | | **Profit for the period attributable to equity shareholders** | **1.7** | **289.4** | **291.1** | Non-underlying operating items in the prior period related to the impact of COVID-19 and business separation costs. Government grants of £0.1 million in respect of the Coronavirus Job Retention Scheme were included within operating expenses for discontinued operations in the prior period. # Cash flows from discontinued operations | | 2021 £m | | --- | --- | | Net cash outflow from operating activities | (86.8) | | Net cash inflow from investing activities | 227.7 | | Net cash outflow from financing activities | (0.2) | | **Net increase in cash and cash equivalents** | **140.7** | 1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary on page 167. # Disposal of discontinued operations | | 2021 £m | | --- | --- | | Consideration received in cash (net of disposal costs) | 228.2 | | Shares in Carlsberg Marston's Limited (formerly Carlsberg Marston's Brewing Company Limited) | 285.5 | | Balance owed by Marston's Beer Company Limited at completion | 55.5 | | Contingent consideration | 8.5 | | **Total consideration** | **577.5** | | Goodwill | 29.5 | | Other intangible assets | 62.5 | | Property, plant and equipment | 157.5 | | Trade loans | 8.5 | | Inventories | 28.5 | | Trade and other receivables | 56.5 | | Cash and cash equivalents | 0.5 | | Borrowings | (21.5) | | Trade and other payables | (20.5) | | Deferred tax liabilities | (13.5) | | **Net assets disposed of** | **287.5** | | **Gain on disposal of discontinued operations** | **290.5** | | | 2021 £m | | --- | --- | | Consideration received in cash (net of disposal costs) | 228.2 | | Cash and cash equivalents disposed of | (0.2) | | **Net cash inflow on disposal** | **228.2** | The final balance of contingent consideration due of £28.2 million was received during the current period. 130 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 9 EARNINGS PER ORDINARY SHARE 2022 2021 m m Basic earnings/(loss) per share are calculated by dividing the profit/(loss) attributable to equity shareholders by the weighted average number of ordinary shares in issue during the period, Basic weighted average number of shares 633.1 632.8 excluding treasury shares and those held on trust for employee share schemes (note 29). Dilutive potential ordinary shares 9.4 – For diluted earnings/(loss) per share, the weighted average number of ordinary shares in issue Diluted weighted average number of shares 642.5 632.8 is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share In the prior period in accordance with IAS 33 ‘Earnings per Share’ the potential ordinary shares options granted to employees where the exercise price is less than the weighted average were not dilutive as their inclusion would reduce the loss per share for continuing operations. market price of the Company’s shares during the period. 1 Underlying earnings/(loss) per share figures are presented to exclude the effect of non- ### 10 GOODWILL AND OTHER INTANGIBLE ASSETS 1 | underlying | items. The Directors consider that the supplementary figures are a useful indicator | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | of performance. | | | | | | | | | | | Goodwill | | | | | | 2022 2021 | | | | | | | Goodwill of £201.7 million was fully impaired in prior accounting periods and has a net book | | | | | | | Per share | | | | Per share | | amount of £nil as at 1 October 2022 and 2 October 2021. | | | | Earnings | | | amount | | Earnings | | amount | | | | | | | £m | | | p | | £m | | p | | Other intangible assets Basic earnings/(loss) per share Computer software Total 137.2 21.7 162.8 25.7 £m Continuing 137.2 21.7 (128.3) (20.3) Cost Discontinued – – 291.1 46.0 At 3 October 2021 48.4 Diluted earnings/(loss) per share Additions 3.5 Total 137.2 21.4 162.8 25.7 Net transfers to assets held for sale and disposals (1.8) Continuing 137.2 21.4 (128.3) (20.3) Discontinued – – 291.1 46.0 At 1 October 2022 50.1 1 Underlying earnings/(loss) per share figures Amortisation 1 | Basic underlying | earnings/(loss) per share | At 3 October 2021 12.3 | | --- | --- | --- | | Total 27.5 4.3 (84.5) (13.4) | | Charge for the period 4.4 | | Continuing 27.5 4.3 (86.2) (13.6) | | Net transfers to assets held for sale and disposals (1.7) | Discontinued – – 1.7 0.3 At 1 October 2022 15.0 1 Diluted underlying earnings/(loss) per share Total 27.5 4.3 (84.5) (13.4) Net book amount at 2 October 2021 36.1 Continuing 27.5 4.3 (86.2) (13.6) Discontinued – – 1.7 0.3 Net book amount at 1 October 2022 35.1 1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary on page 167. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 131 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 | 10 GOODWILL AND OTHER INTANGIBLE ASSETS CONTINUED | | | 11 PROPERTY, PLANT AND EQUIPMENT | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Computer | | | Effective | | | Fixtures, | | | | software | | | freehold | Leasehold | | fittings, | | | | | £m | | land and | land and | | tools and | | | | | | | buildings | buildings | equipment | | Total | Cost £m £m £m £m At 4 October 2020 41.6 Cost or valuation Additions 7.5 At 3 October 2021 1,530.0 482.9 271.2 2,284.1 Net transfers to assets held for sale and disposals (0.7) Additions 34.1 12.8 32.7 79.6 At 2 October 2021 48.4 Disposals (5.0) (12.6) (18.9) (36.5) Transfers between asset classes 49.0 (49.0) – – | Amortisation | Net transfers to assets held for sale (0.8) – (0.1) (0.9) | | --- | --- | | At 4 October 2020 9.1 | Revaluation 75.1 – – 75.1 | | Charge for the period 3.8 | At 1 October 2022 1,682.4 434.1 284.9 2,401.4 | Net transfers to assets held for sale and disposals (0.6) At 2 October 2021 12.3 Depreciation At 3 October 2021 0.1 157.2 142.6 299.9 Charge for the period – 14.3 25.5 39.8 Net book amount at 3 October 2020 32.5 Disposals (0.1) (12.6) (18.6) (31.3) Net book amount at 2 October 2021 36.1 Transfers between asset classes 13.0 (13.0) – – Impairment (reversal) (13.0) (5.2) 0.2 (18.0) At 1 October 2022 – 140.7 149.7 290.4 Net book amount at 2 October 2021 1,529.9 325.7 128.6 1,984.2 Net book amount at 1 October 2022 1,682.4 293.4 135.2 2,111.0 During the current period the Group purchased the options to buy the freehold of 17 leasehold properties at the end of the lease term for a nominal amount. These properties were transferred to effective freehold land and buildings in line with the Group’s accounting policy. 132 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 If the effective freehold land and buildings had not been revalued, the historical cost net book ### 11 PROPERTY, PLANT AND EQUIPMENT CONTINUED amount would be £1,183.7 million (2021: £1,102.3 million). Effective Fixtures, Cost at 1 October 2022 includes £8.5 million (2021: £3.1 million) of assets in the course of freehold Leasehold fittings, construction. | land and | | land and | | Plant and | | tools and | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | buildings | | buildings | | machinery | | equipment | | Total | Interest costs of £0.2 million (2021: £nil) were capitalised in the period in respect of the | | | £m | | £m | | £m | | £m | £m | | financing of major projects. The capitalisation rate used was 6%. Cost or valuation The net profit on disposal of property, plant and equipment, intangible assets and properties At 4 October 2020 1,625.6 392.0 0.1 278.7 2,296.4 classified as held for sale was £2.7 million (2021: loss of £1.1 million). Additions 20.2 96.1 – 12.3 128.6 Capital expenditure authorised and committed at the period end but not provided for in the Disposals (12.7) (5.2) (0.1) (19.5) (37.5) financial statements was £4.2 million (2021: £2.7 million). Net transfers to assets held for sale (2.6) – – (0.3) (2.9) The net book amount of effective freehold land and buildings held as part of sale and Revaluation (100.5) – – – (100.5) leaseback arrangements that do not fall within the scope of IFRS 16 ‘Leases’ was £265.3 million (2021: £230.3 million). At 2 October 2021 1,530.0 482.9 – 271.2 2,284.1 The disaggregation of land and buildings into assets leased to tenants under operating leases and those held and used by the Group is as follows: Depreciation 2022 2021 At 4 October 2020 0.1 121.3 0.1 136.6 258.1 Leased to Used by Leased to Used by Charge for the period 0.1 13.6 – 25.2 38.9 | | | tenants | | the Group | | Total | tenants | | the Group | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Disposals (0.1) (4.7) (0.1) (19.1) (24.0) | Effective freehold land and buildings | | £m | | £m | £m | | £m | | £m | £m | | Net transfers to assets held for sale – – – (0.2) (0.2) | Cost or valuation 201.2 1,481.2 1,682.4 248.3 1,281.7 1,530.0 | | | | | | | | | | | | Impairment – 27.0 – 0.1 27.1 | Depreciation – – – (0.1) – (0.1) | | | | | | | | | | | | At 2 October 2021 0.1 157.2 – 142.6 299.9 | Net book amount 201.2 1,481.2 1,682.4 248.2 1,281.7 1,529.9 | | | | | | | | | | | 2022 2021 Net book amount at 3 October 2020 1,625.5 270.7 – 142.1 2,038.3 | | | Leased to | | | Used by | | | Leased to | | Used by | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Net book amount at 2 October 2021 1,529.9 325.7 – 128.6 1,984.2 | | | tenants | | the Group | | Total | tenants | | the Group | | Total | | | Leasehold land and buildings | | | £m | | £m | £m | | £m | | £m | £m | The net book amount of land and buildings is split as follows: Cost 23.9 410.2 434.1 25.2 457.7 482.9 2022 2021 Depreciation (8.3) (132.4) (140.7) (6.7) (150.5) (157.2) £m £m Net book amount 15.6 277.8 293.4 18.5 307.2 325.7 Freehold land and buildings 1,507.7 1,395.2 The services provided to the tenants are considered to be significant to the arrangement as a Leasehold land and buildings with a term greater than 100 years at acquisition/commencement 174.7 134.7 whole such that the properties do not qualify as investment properties under IAS 40 ‘Investment Property’. Leasehold land and buildings with a term less than 100 years at acquisition/ commencement 293.4 325.7 1,975.8 1,855.6 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 133 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 The tables below show the level in the fair value hierarchy into which the fair value ### 11 PROPERTY, PLANT AND EQUIPMENT CONTINUED measurements of effective freehold land and buildings have been categorised: Revaluation/impairment 2022 At 3 July 2022 independent chartered surveyors revalued the Group’s effective Level 1 Level 2 Level 3 Total freeholdproperties on an open market value basis. During the current and prior period Recurring fair value measurements £m £m £m £m variousassetswere also reviewed for impairment and/or material changes in value. Effective freehold land and buildings – – 1,682.4 1,682.4 Thesevaluation adjustments were recognised in the revaluation reserve or the income | statement as appropriate. | | | | | | | 2021 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | 2022 | 2021 | | | | | | | | | | | | | Recurring fair value measurements | | £m | | £m | | £m | £m | | | £m | £m | | | | | | | | | Effective freehold land and buildings – – 1,529.9 1,529.9 Income statement: Impairment (48.2) (104.0) There are two inputs to the fair value measurement of the public house assets, being the fair Reversal of past impairment 69.8 22.3 maintainable trade (an unobservable Level 3 input) and the multiple applied (an indirectly observable Level 2 input). At 1 October 2022 and 2 October 2021 it was considered that the 21.6 (81.7) unobservable Level 3 input for the fair maintainable trade is a significant input to the valuation Revaluation reserve: and as such Level 3 was the most appropriate categorisation for these fair value Unrealised revaluation surplus 105.8 59.1 measurements. There were no transfers between categories during the period. Reversal of past revaluation surplus (34.3) (105.0) A reasonably possible increase of 10.0% in the multiple would increase the fair value by £178.3million and a reasonably possible decrease of 10.0% in the multiple would decrease 71.5 (45.9) thefair value by £178.3 million. A reasonably possible increase of 4.0% in the fair maintainable Net increase/(decrease) in shareholders’ equity/property, plant and trade would increase the fair value by £71.3 million and a reasonably possible decrease of equipment 93.1 (127.6) 4.0% in the fair maintainable trade would decrease the fair value by £71.3 million. These are based on the top ends of observable multiples achieved in the market and historic Fair value of effective freehold land and buildings movements in the average fair maintainable trade. IFRS 13 ‘Fair Value Measurement’ requires fair value measurements to be recognised using The Group’s effective freehold land and buildings are revalued by external independent afair value hierarchy that reflects the significance of the inputs used in the measurements, qualified valuers on an annual basis using open market values so that the carrying value of according to the following levels: 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, and Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities. a desktop valuation of the remaining two-thirds of the sites, such that all sites are individually Level 2 – inputs other than quoted prices included within Level 1 that are observable for the inspected every three years. The last external valuation of the Group’s effective freehold land asset or liability, either directly or indirectly. and buildings was performed as at 3 July 2022. The Group has an internal team of qualified Level 3 – inputs for the asset or liability that are not based on observable market data. valuers and at each reporting date the estate is reviewed for any indication of significant changes in value. Where this is the case internal valuations are performed on a basis consistent with those performed externally. The Group has concluded that the valuation as at 3 July 2022 does not differ materially from that which would have been determined using fair value as at 1 October 2022. 134 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 11 PROPERTY, PLANT AND EQUIPMENT CONTINUED | Level 3 recurring fair value measurements | 2022 £m | 2021 £m | | --- | --- | --- | | At beginning of the period | 1,529.9 | – | | Additions | 34.1 | 20.2 | | Transfers | 36.0 | 1,625.5 | | Disposals | (4.9) | (12.6) | | Net transfers to assets held for sale | (0.8) | (2.6) | | Revaluation gains and losses recognised in profit or loss | 16.6 | (54.6) | | Revaluation gains and losses recognised in other comprehensive income | 71.5 | (45.9) | | Depreciation charge for the period | – | (0.1) | | **At end of the period** | **1,682.4** | **1,529.9** | Revaluation gains and losses recognised in profit or loss in respect of Level 3 recurring fair value measurements are included within operating expenses in the income statement and comprise net unrealised gains of £16.6 million (2021: losses of £54.4 million) and net realised losses of £nil (2021: £0.2 million). # Impairment testing of leasehold properties Leasehold properties, comprising leasehold land and buildings and associated fixtures, fittings, tools and equipment and computer software, are held under the cost model. These properties were reviewed for impairment in the current and prior period by comparing the recoverable amount of each property to the carrying amount of the assets. Recoverable amount is the higher of value in use and fair value less costs to sell. The key assumptions used in the value in use calculations were the future trading cash flows of the properties, a pre-tax discount rate of 10.3% (2021: 9.4%) and a long-term growth rate of 1.8% (2021: 1.5%). Changes in these key assumptions could impact the impairment charge/reversal recognised for these assets. The future trading cash flows used in the value in use calculations are property level EBITDA less maintenance expenditure forecasts. If the forecast cash flows were to decline by 4.0% then there would be a £0.9 million increase in the impairment recognised. If the pre-tax discount rate were to increase by 2.0% it would increase the impairment by £2.6 million. If the long-term growth rate were to decrease by 0.5% it would increase the impairment by £0.9 million. # 12 INTERESTS IN ASSOCIATES On 30 October 2020 the Group acquired a 40% interest in Carlsberg Marston's Limited (formerly Carlsberg Marston's Brewing Company Limited), from which date it has been the sole supplier of drinks to the Group. The principal place of business of Carlsberg Marston's Limited (formerly Carlsberg Marston's Brewing Company Limited) is the UK. The tables below summarise the financial information of Carlsberg Marston's Limited (formerly Carlsberg Marston's Brewing Company Limited) as included in its own financial statements for the period from 1 October 2021 to 30 September 2022, adjusting for fair value adjustments of acquisition and differences in accounting policies. The comparison is the period from 30 October 2020 to 30 September 2021. | | 2022 £m | 2021 £m | | --- | --- | --- | | Non-current assets | 239.3 | 264.4 | | Current assets | 299.5 | 312.1 | | Current liabilities | (360.4) | (340.1) | | Non-current liabilities | (35.8) | (45.1) | | Net assets | 142.6 | 190.1 | | Group's share of net assets (40%) | 57.0 | 76.1 | | Goodwill | 203.9 | 201.1 | | Elimination of unrealised profit on upstream sales | (0.6) | (0.1) | | **Carrying amount of interest in associate** | **260.3** | **277.1** | | | 2022 £m | 2021 £m | | Revenue | 836.9 | 628.1 | | Profit/(loss) from continuing operations | 8.2 | (34.1) | | Other comprehensive expense | (2.0) | – | | Total comprehensive income/(expense) | 6.2 | (34.1) | | Group's share of profit/(loss) from continuing operations (40%) | 3.3 | (13.1) | | Elimination of unrealised profit on upstream sales | – | (0.1) | | Income/(loss) from associates recognised in the income statement | 3.3 | (14.1) | | Group's share of other comprehensive expense (40%) | (0.8) | – | | **Group's share of total comprehensive income/(expense)** | **2.5** | **(14.1)** | MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 12 INTERESTS IN ASSOCIATES CONTINUED 14 DEFERRED TAX Details of related party transactions with Carlsberg Marston’s Limited (formerly Carlsberg Deferred tax is calculated on temporary differences between tax bases of assets and liabilities Marston’s Brewing Company Limited) are as follows: and their carrying amounts under the liability method using a tax rate of 25% (2021: 25%). Themovement on the deferred tax accounts is shown below: Transaction amount Balance outstanding | | 2022 | 2021 | 2022 | 2021 | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | | | £m | £m | £m | £m | Net deferred tax liability/(asset) | £m | £m | | Purchase of goods (171.7) (84.4) (34.3) (42.4) | | | | | At beginning of the period (47.6) (16.7) | | | | Rendering of services 1.7 4.3 – 0.5 | | | | | Charged/(credited) to the income statement: | | | | Settlement of liabilities on behalf of associate 121.8 281.3 (5.9) 78.3 | | | | | Continuing operations 24.9 (42.3) | | | | Dividends from associates 19.4 – – – | | | | | Discontinued operations – (0.7) | | | | Receipt of cash on behalf of associate (249.7) (437.7) (0.5) (62.7) | | | | | Charged/(credited) to equity: | | | Impairment and revaluation of properties 14.7 9.8 There was a transitional services agreement in place between the Group and Carlsberg Hedging reserve 10.2 (1.7) Marston’s Limited (formerly Carlsberg Marston’s Brewing Company Limited) whereby the Retirement benefits 5.8 2.5 transactions for Marston’s Beer Company Limited continued to be processed through the Group’s systems and bank accounts until 29 January 2022. Classified as held for sale and disposals – 1.5 All outstanding balances are to be settled in cash within six months and are unsecured. At end of the period 8.0 (47.6) Carlsberg Marston’s Limited (formerly Carlsberg Marston’s Brewing Company Limited) operates in a sector that has been disproportionately impacted by COVID-19 and as such an impairment 2022 2021 review was undertaken under IAS 36 ‘Impairment of Assets’. The recoverable amount was Recognised in the balance sheet £m £m estimated on a value in use basis. This was based on forecast cash flows approved by the Deferred tax liabilities (after offsetting) 8.0 – boardof Carlsberg Marston’s Limited (formerly Carlsberg Marston’s Brewing Company Limited), Deferred tax assets (after offsetting) – (47.6) a long-term growth rate of 1.8% and a discount rate of 7.1%. The impairment review indicated there was significant headroom over the carrying amount. No reasonably possible change in 8.0 (47.6) the assumptions used would have resulted in an impairment. The movements in deferred tax assets and liabilities (prior to the offsetting of balances within ### 13 OTHER NON-CURRENT ASSETS the same jurisdiction as permitted by IAS 12 ‘Income Taxes’) during the period are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable 2022 2021 right of offset and there is an intention to settle the balances net. £m £m Finance lease receivables 17.9 15.9 Further detail regarding the impairment of finance lease receivables is provided in note 25. 136 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 14 DEFERRED TAX CONTINUED | Deferred tax liabilities | Pensions £m | Accelerated capital allowances £m | Revaluation of properties £m | Rolled over capital gains £m | Other £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | | At 3 October 2021 | – | 30.6 | 37.6 | 7.4 | 5.0 | 80.6 | | Charged/(credited) to the income statement | – | 15.1 | 3.4 | (2.8) | (5.0) | 10.7 | | Charged to equity | 3.8 | – | 14.9 | – | – | 18.7 | | **At 1 October 2022** | **3.8** | **45.7** | **55.9** | **4.6** | **–** | **110.0** | | Deferred tax assets | Pensions £m | Tax losses £m | Interest rate swaps £m | Other £m | Total £m | | --- | --- | --- | --- | --- | --- | | At 3 October 2021 | (3.6) | (49.4) | (41.3) | (33.9) | (128.2) | | Charged/(credited) to the income statement | 1.6 | (8.0) | 27.2 | (6.6) | 14.2 | | Charged/(credited) to equity | 2.0 | – | 10.2 | (0.2) | 12.0 | | **At 1 October 2022** | **–** | **(57.4)** | **(3.9)** | **(40.7)** | **(102.0)** | # Net deferred tax liability/(asset) | At 2 October 2021 | (47.6) | | --- | --- | | **At 1 October 2022** | **8.0** | | Deferred tax liabilities | Accelerated capital allowances £m | Revaluation of properties £m | Rolled over capital gains £m | Other £m | Total £m | | --- | --- | --- | --- | --- | --- | | At 4 October 2020 | 26.3 | 38.2 | 7.4 | – | 71.1 | | Charged/(credited) to the income statement | 3.2 | (10.4) | – | 5.0 | (2.1) | | Charged to equity | – | 9.8 | – | – | 9.8 | | Classified as held for sale and disposals | 1.1 | – | – | – | 1.1 | | **At 2 October 2021** | **30.6** | **37.6** | **7.4** | **5.0** | **80.6** | | Deferred tax assets | Pensions £m | Tax losses £m | Interest rate swaps £m | Other £m | Total £m | | --- | --- | --- | --- | --- | --- | | At 4 October 2020 | (7.0) | (29.7) | (41.0) | (10.9) | (88.1) | | Charged/(credited) to the income statement | 0.9 | (20.5) | 1.4 | (22.6) | (40.1) | | Charged/(credited) to equity | 2.5 | – | (1.7) | – | 0.8 | | Classified as held for sale and disposals | – | 0.8 | – | (0.4) | 0.8 | | **At 2 October 2021** | **(3.6)** | **(49.4)** | **(41.3)** | **(33.9)** | **(128.2)** | # Net deferred tax asset | At 3 October 2020 | (16.4) | | --- | --- | | **At 2 October 2021** | **(47.6)** | Deferred tax assets have been recognised in respect of all tax losses and other temporary differences where it is probable that these assets will be recovered. Determining the recoverability of the deferred tax asset in respect of trading items requires judgements to be made about the future profitability of the Group. The Group generated significant tax losses in prior periods due to the impact of COVID-19 on its business operations including enforced pub closures and restrictions on trading. The base case forecast from the going concern assessment set out in note 1 was used to forecast future taxable profits and allowing for a range of reasonably possible outcomes it is estimated that the deferred tax asset in respect of trading items will be recovered within a period of five years. As such it has been recognised in full. A deferred tax asset has not been recognised in respect of deductible temporary difference relating to capital losses of £39.1 million (2021: £73.2 million) due to uncertainty over its future recoverability. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 15 RETIREMENT BENEFITS Changes in life expectancy An increase in the life expectancy of members will result in benefits being paid out for longer, During the period the Group contributed to a funded defined benefit pension plan and a leading to an increase in the defined benefit obligation. number of defined contribution pension plans. These plans are considered to be related parties of the Group. The movements in the fair value of plan assets and the present value of the defined benefit obligation during the period were: Defined contribution plans Fair value Present value of defined Net surplus/ of plan assets benefit obligation (deficit) Pension costs for defined contribution plans are as follows: | | | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 | 2021 | £m | £m | £m | £m | £m | £m | | £m | £m | | | | | | | At beginning of the period 527.8 531.1 (542.2) (568.3) (14.4) (37.2) Defined contribution plans 6.3 6.1 Past service cost – – – (0.5) – (0.5) Interest income/(expense) 10.4 8.9 (10.6) (9.5) (0.2) (0.6) Defined benefit plan Remeasurements: The Marston’s PLC Pension and Life Assurance Scheme is a final salary pension plan which Return on plan assets provides benefits to members in the form of a guaranteed level of pension payable for life. (excluding interest income) (147.3) 3.2 – – (147.3) 3.2 Theplan closed to future accrual on 30 September 2014 and the link to future salary increases Effect of changes in financial was also removed. assumptions – – 181.5 5.1 181.5 5.1 The plan operates under the UK regulatory framework and is governed by a board of Trustees Effect of changes in composed of plan participants and representatives of the Group. The Trustees make investment demographic assumptions – – 0.7 (0.8) 0.7 (0.8) decisions and set the required contribution rates based on independent actuarial advice. Effect of experience adjustments – – (11.6) 9.9 (11.6) 9.9 The Group’s balance sheet date of 1 October 2022 is a Saturday and, accordingly, the fair value of plan assets have been calculated as at 30 September 2022. There were no significant Cash flows: transactions between the respective reporting dates. Employer contributions 7.3 7.5 – – 7.3 7.5 The key risks to which the plan exposes the Group are as follows: Administrative expenses paid from plan assets (0.9) (1.0) – – (0.9) (1.0) Volatility of plan assets Benefits paid (22.7) (21.9) 22.7 21.9 – – Assets held by the plan are invested in a diversified portfolio of equities, bonds and other assets. Volatility in asset values will lead to movements in the net defined benefit asset/liability At end of the period 374.6 527.8 (359.5) (542.2) 15.1 (14.4) reported in the balance sheet as well as movements in the net interest on the net defined Pension costs recognised in the income statement benefit asset/liability reported in the income statement. A charge of £nil (2021: £0.5 million) comprising the past service cost is included within Changes in bond yields employee costs, a charge of £0.2 million (2021: £0.6 million) comprising the net interest on the Corporate bond yields are used to determine the plan’s defined benefit obligation. Lower net defined benefit asset/liability is included within finance costs and a charge of £0.9 million yields will lead to an increased defined benefit obligation. Increases in the defined benefit (2021: £1.0 million) comprising the administrative expenses paid from plan assets is included obligation will be partly offset by an increase in the value of government and corporate bonds within finance costs. held by the plan. Inflation risk A large proportion of the plan’s obligations are linked to inflation. Higher inflation will lead to an increased defined benefit obligation. Increases in the defined benefit obligation will be partly offset by an increase in inflation linked assets held by the plan. 138 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 15 RETIREMENT BENEFITS CONTINUED On 26 October 2018 a High Court ruling indicated that Guaranteed Minimum Pensions must be equalised for men and women. On 20 November 2020 a further High Court ruling indicated that historic cash equivalent transfer values that were calculated on an unequalised basis should be topped up if an affected member makes a successful claim. This additional requirement was reflected in the calculation of the Group's net defined benefit asset/liability in the prior period and the resulting additional past service cost of £0.5 million was classified as a non-underlying item (note 4). # Recognition of net defined benefit asset The Group has the ability to recognise a pension surplus from the defined benefit pension plan (measured under IAS 19 'Employee Benefits') in the current year as the Scheme Rules provide the Group with an unconditional right to a refund of a surplus once the last benefit has been paid to the last scheme member. It is considered that contributions payable under a minimum funding requirement would be available as a refund or reduction in future contributions after they are paid into the plan. As such where the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognises an asset at the lower of the fair value of plan assets less the present value of the defined benefit obligation, and the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. An updated actuarial valuation of the plan was performed by Mercer as of 1 October 2022 for the purposes of IAS 19 'Employee Benefits'. The principal assumptions made by the actuaries were: | | 2022 | 2021 | | --- | --- | --- | | Discount rate | 5.2% | 2.0% | | Rate of increase in pensions – 5% LPI | 3.2% | 3.2% | | Rate of increase in pensions – 2.5% LPI | 2.1% | 2.1% | | Inflation assumption (RPI) | 3.5% | 3.4% | | Inflation assumption (CPI) | 2.8% | 2.6% | | Employed deferred revaluation | 2.8% | 2.6% | | Life expectancy for deferred members from age 65 (years) | | | | Male | 22.7 | 22.7 | | Female | 25.4 | 25.4 | | Life expectancy for current non-insured pensioners from age 65 (years) | | | | Male | 20.9 | 20.9 | | Female | 23.6 | 23.6 | | Life expectancy for current insured pensioners from age 65 (years) | | | | Male | 21.6 | 21.6 | | Female | 24.0 | 23.9 | Following the September 2022 Mini Budget, a period of market volatility in the weeks preceding the balance sheet date was observed, particularly in the UK bond/gift markets. All assumptions made within the actuarial valuation of the plan took into consideration market conditions as of 1 October 2022. To counteract the high levels of inflation and fall in the value of sterling following the September 2022 Mini Budget, the Bank of England signalled future increases in interest rates. This expectation of future increases in interest rates led to significant falls in the value of fixed interest investments (such as gilts and corporate bonds) with corresponding increases in yield. The Marston's PLC Pension and Life Assurance Scheme uses Liability Driven Investment strategies (LDIs) which use a combination of gilts, cash and derivatives to hedge long-term interest and inflation risks. The pension plan met collateral calls required for the LDI investment through a number of disinvestments. The hedge ratios remain in line with the target. Mortality assumptions are based on standard tables adjusted for plan experience and with an allowance for future improvement in life expectancy. These assumptions have not been adjusted for the impact of COVID-19 given the uncertainty over the long-term impact of the pandemic. The sensitivity of the defined benefit obligation to changes in the principal actuarial assumptions is: | | Change in assumption | Increase in assumption | Decrease in assumption | | --- | --- | --- | --- | | Discount rate | 0.50% | Decrease by 5.5% | Increase by 6.1% | | Inflation assumption | 0.25% | Increase by 2.4% | Decrease by 2.3% | | Life expectancy | One year | Increase by 4.4% | Decrease by 4.2% | This discount rate sensitivity has increased to 0.50% (2021: 0.25%) as a result of the volatile macroeconomic conditions experienced in the financial period ended 1 October 2022 which led to unprecedented increases in UK gilt and bond yields. The above sensitivity analyses have been determined by changing one assumption while holding all other assumptions constant. In practice, interrelationships exist between the assumptions, particularly between the discount rate and price inflation. The stand-alone sensitivity analyses noted above do not consider the effect of these interrelationships. Any movements in obligations arising from assumption changes are likely to be accompanied by movements in asset values, and so the impact on the net defined benefit asset may be different to the impact on the obligation calculated by the sensitivity analysis. When calculating the above sensitivities the same method has been applied as when calculating the net defined benefit asset/liability in the balance sheet i.e. the present value of the defined benefit obligation calculated using the Projected Unit Credit Method. 1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary on page 167. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 | 15 RETIREMENT BENEFITS CONTINUED | | | 16 DERIVATIVE FINANCIAL INSTRUMENTS | | | | --- | --- | --- | --- | --- | --- | | | 2022 | 2021 | | 2022 | 2021 | | Plan assets | £m | £m | Interest rate swaps | £m | £m | | Equities 45.9 94.2 | | | Non-current assets 1.8 – | | | | Bonds/Gilts 92.3 116.7 | | | Current assets 3.3 – | | | | Cash/Other 62.2 75.3 | | | Non-current liabilities (25.5) (170.5) | | | Buy-in policies (matching annuities) 174.2 241.6 (20.4) (170.5) 374.6 527.8 Details of the Group’s interest rate swaps are provided in note 25. All equities and bonds have an unadjusted quoted price in active markets for identical assets. ### Equities and bonds are valued at Level 1 in the fair value hierarchy. The plan holds £170.1 million of 17 INVENTORIES pooled investments with BlackRock, M&G, Insight and Ruffer which are valued using inputs that 2022 2021 reflect the assumptions that market participants would use in pricing the asset based on market £m £m data from independent sources. The pooled investment vehicles are primarily valued at Level 2 in Raw materials and consumables 3.8 3.2 the fair value hierarchy, £7.4 million of the pooled investment vehicles are valued at Level 3 in the Finished goods 8.8 9.7 fair value hierarchy. Unquoted investments are held with Ruffer and valued on a monthly basis. The latest audited valuation of the unquoted investments was performed as at 31 August 2022 12.6 12.9 and a roll forward using market indices was performed to provide a valuation as at 1 October 2022. The plan includes insurance policies which are valued using the Group’s own assessment of ### 18 TRADE AND OTHER RECEIVABLES the assumptions market participants would use in pricing the asset, based on the best information 2022 2021 available. The insurance policies are valued at Level 3 in the fair value hierarchy. £m £m The actual return on plan assets was a loss of £136.9 million (2021: a gain of £12.1 million). Trade receivables 11.2 9.4 Aproportion of the defined benefit obligation has been secured by buy-in policies and as Prepayments and accrued income 15.6 8.7 such this proportion of liabilities is matched by annuities. The Trustees of the plan hold a range Finance lease receivables 1.8 2.5 of assets and are aiming to better align the cash flows from these to those of the plan. They are also working with the Group to de-risk their portfolio further. Contingent consideration – 28.9 Other receivables 1.5 2.8 The Group is aiming to eliminate the plan’s funding deficit in the medium term. A schedule ofcontributions was agreed as part of the 30 September 2020 triennial valuation and 30.1 52.3 contributions of £0.5 million per month are payable until 30 November 2025. Contributions are also payable in respect of the plan’s expenses. The next triennial valuation will be performed Further detail regarding the impairment of trade receivables, finance lease receivables and as at 30 September 2023. other receivables is provided in note 25. Further detail regarding the fair value measurement of the contingent consideration is provided in note 25. All of the Group’s trade receivables are The employer contributions expected to be paid during the financial period ending denominated in pounds sterling. 30September 2023 amount to £8.0 million. At 1 October 2022 the value of collateral held in the form of cash deposits was £5.6 million The weighted average duration of the defined benefit obligation is 12 years (2021: 16 years). (2021: £5.6 million). Post-retirement medical benefits A gain of £nil (2021: £0.1 million) in respect of the remeasurement of post-retirement medical benefits has been included in the statement of comprehensive income. 140 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 19 ASSETS HELD FOR SALE | | 2022 £m | 2021 £m | | --- | --- | --- | | Properties | 4.8 | 5.1 | In accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations', properties categorised as held for sale have been written down to their fair value less costs to sell if this was below their carrying amount. This is a non-recurring fair value measurement falling within Level 2 of the fair value hierarchy. These Level 2 fair values have been obtained using a market approach and are derived from sales prices in recent transactions involving comparable properties. During the current and prior period, all properties classified as held for sale were reviewed for impairment or reversal of impairment. This review identified an impairment of £0.3 million (2021: £1.8 million) and a reversal of impairment of £0.6 million (2021: nil) which have been recognised in the income statement. # 20 BORROWINGS | Current | 2022 £m | 2021 £m | | --- | --- | --- | | Bank borrowings | (0.7) | (0.7) | | Securitised debt | 39.0 | 36.9 | | Lease liabilities | 11.2 | 6.7 | | Other lease related borrowings | (0.4) | (0.4) | | Other borrowings | 15.0 | 25.0 | | | 64.1 | 67.5 | | Non-current | 2022 £m | 2021 £m | | Bank borrowings | 214.6 | 188.9 | | Securitised debt | 601.3 | 640.3 | | Lease liabilities | 366.6 | 364.9 | | Other lease related borrowings | 338.0 | 337.6 | | Other borrowings | 40.0 | 40.0 | | Preference shares | 0.1 | 0.1 | | | 1,560.6 | 1,571.8 | All bank borrowings are unsecured. Other lease related borrowings represent amounts due under sale and leaseback arrangements that do not fall within the scope of IFRS 16 'Leases'. The Group has an option to repurchase each leased property for a nominal amount at the end of the lease. The leases have terms of 35 to 40 years and rents which are linked to RPI, subject to a cap and collar. The Group has 75,000 (2021: 75,000) preference shares of £1 each in issue at the balance sheet date. The preference shares carry the right to a fixed cumulative preferential dividend at the rate of 6% per annum (they are also entitled to a non-cumulative dividend of 1% per annum provided that dividends of not less than £24,000 have been paid on the ordinary shares in the year). They participate in the event of a winding-up and on a return of capital and carry the right to attend and vote at general meetings of the Company, carrying four votes per share. All of the Group's borrowings are denominated in pounds sterling. There were no instances of default, including covenant terms, in either the current or prior period. The Group obtained certain covenant waivers from its lenders in the current and prior period as a result of the COVID-19 outbreak. # Maturity of borrowings The maturity profile of the carrying amount of the Group's borrowings at the period end was as follows: | Due: | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Gross borrowings £m | Unamortised issue costs £m | Net borrowings £m | Gross borrowings £m | Unamortised issue costs £m | Net borrowings £m | | Within one year | 65.6 | (1.5) | 64.1 | 69.0 | (1.5) | 67.7 | | In more than one year but less than two years | 266.8 | (1.2) | 265.6 | 47.9 | (1.7) | 46.1 | | In more than two years but less than five years | 211.8 | (2.7) | 209.1 | 392.7 | (3.0) | 389.1 | | In more than five years | 1,108.6 | (22.7) | 1,085.9 | 1,159.4 | (23.5) | 1,135.1 | | | 1,652.8 | (28.1) | 1,624.7 | 1,669.0 | (29.7) | 1,639.1 | MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 The tranches of securitised debt have the following principal terms: ### 20 BORROWINGS CONTINUED | | | | | | | Expected | | Expected | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Fair value of borrowings | | 2022 | 2021 | | Principal repayment | average | | maturity | | | | Tranche | £m | £m Interest | period – by instalments | | | life | | date | The carrying amount and the fair value of the Group’s borrowings are as follows: A2 157.3 183.9 Fixed/floating 2022 to 2027 5 years 2027 Carrying amount Fair value A3 200.0 200.0 Fixed/floating 2027 to 2032 10 years 2032 | | 2022 | 2021 | 2022 | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | £m | £m | £m | £m | A4 130.9 141.7 Floating 2022 to 2031 9 years 2031 | | | Bank borrowings 215.0 190.0 215.0 190.0 | | | | | B 155.0 155.0 Fixed/floating 2032 to 2035 13 years 2035 | | | Securitised debt 643.2 680.6 556.7 614.7 | | | | | | 643.2 680.6 | Lease liabilities 377.8 371.6 377.8 371.6 The interest payable on each tranche is as follows: Other lease related borrowings 361.7 361.7 361.7 361.7 Tranche Before step up After step up Step up date Other borrowings 55.0 65.0 55.0 65.0 Preference shares 0.1 0.1 0.1 0.1 A2 5.1576% SONIA + 0.1193% + 1.32% July 2019 A3 5.1774% SONIA + 0.1193% + 1.45% April 2027 1,652.8 1,669.0 1,566.3 1,603.1 A4 3-month LIBOR + 0.65% SONIA + 0.1193% + 1.625% October 2012 The fair value of the Group’s securitised debt is based on quoted market prices and is within B 5.6410% SONIA + 0.1193% + 2.55% July 2019 Level 1 of the fair value hierarchy. The fair values of all of the Group’s other borrowings approximate to their carrying amounts and are within Level 2 of the fair value hierarchy. The Group agreed with its bondholders to replace 3-month LIBOR with the compounded Sterling Overnight Index Average (SONIA) plus 0.1193% after the discontinuance of LIBOR. 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 All floating rate notes are economically hedged in full by the Group using interest rate swaps private placement in place until 2024, and a £5.0 million seasonal overdraft facility which whereby all interest payments are swapped to fixed interest payable. extends to £20.0 million from 25 January to 6 May and 1 July to 12 August each year. At 1 October 2022 Marston’s Pubs Limited held cash of £21.0 million (2021: £25.8 million), which was governed by certain restrictions under the covenants associated with the securitisation. ### 21 SECURITISED DEBT Inaddition, Marston’s Issuer PLC held cash of £0.1 million (2021: £0.1 million). On 9 August 2005 £805.0 million of secured loan notes were issued in connection with the ### securitisation of 1,592 of the Group’s pubs held in Marston’s Pubs Limited. On 22 November 22 TRADE AND OTHER PAYABLES 2007, a further £330.0 million of secured loan notes (tranches A4 and AB1) were issued in 2022 2021 connection with the securitisation of an additional 437 of the Group’s pubs, also held in £m £m Marston’s Pubs Limited. The loan notes are secured over the properties and their future income Trade payables 95.5 109.0 streams and were issued by Marston’s Issuer PLC, a special purpose entity. On 15 January 2014 Other taxes and social security 25.1 32.3 all of the AB1 notes were repurchased by the Group at par and immediately cancelled. Accruals and deferred income 71.3 65.3 The carrying value of the securitised pubs at 1 October 2022 was £1,166.7 million Other payables 12.5 14.1 (2021:£1,112.3million). 204.4 220.7 The securitisation is governed by various covenants, warranties and events of default, many of which apply to Marston’s Pubs Limited. These include covenants regarding the maintenance The Group has deferred VAT payments of £nil (2021: £15.9 million) under the UK government’s and disposal of securitised properties and restrictions on the ability to move cash to other scheme for the deferral of VAT payments due to COVID-19. companies within the Group. The Group had in place certain covenant waivers from its bondholders in the current and prior period as a result of the COVID-19 outbreak. 142 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 23 PROVISIONS FOR OTHER LIABILITIES AND CHARGES 25 FINANCIAL INSTRUMENTS 2022 2021 Financial instruments by category Property leases £m £m Assets at At beginning of the period 11.1 8.8 fair value Released in the period (7.0) (0.2) through Assets at profit or amortised Provided in the period 0.9 3.7 | | | loss | cost | Total | | --- | --- | --- | --- | --- | | Unwinding of discount 0.1 0.1 | At 1 October 2022 | | | | | | | £m | £m | £m | Utilised in the period (0.8) (1.3) Assets as per the balance sheet At end of the period 4.3 11.1 Derivative financial instruments 5.1 – 5.1 Finance lease receivables (before provision) – 23.5 23.5 2022 2021 Trade receivables (before provision) – 11.9 11.9 Recognised in the balance sheet £m £m Other receivables (before provision) – 2.8 2.8 Current liabilities 1.0 1.5 Other cash deposits – 3.0 3.0 Non-current liabilities 3.3 9.6 Cash and cash equivalents – 27.7 27.7 4.3 11.1 5.1 68.9 74.0 Payments are expected to continue for periods of 1 to 47 years (2021: 1 to 48 years). There is not considered to be any significant uncertainty regarding the amount and timing of these payments. Liabilities at fair value ### 24 OTHER NON-CURRENT LIABILITIES | | | | Derivatives | | | through | | | Other | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | used for | | profit or | | financial | | | | | 2022 | 2021 | | | | | | | | | | | | | | | | hedging | | | loss | liabilities | | | Total | | £m | £m | | | | | | | | | | | | | | At 1 October 2022 | | | £m | | £m | | | £m | £m | Other liabilities 6.5 5.5 Liabilities as per the balance sheet Derivative financial instruments 5.3 20.2 – 25.5 Borrowings – – 1,624.7 1,624.7 Trade payables – – 95.5 95.5 Other payables – – 12.5 12.5 5.3 20.2 1,732.7 1,758.2 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 143 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 25 FINANCIAL INSTRUMENTS CONTINUED Fair values of financial instruments Assets at The only financial instruments which the Group holds at fair value are contingent fair value consideration and derivative financial instruments, which are classified as at fair value through through Assets at profit or loss or derivatives used for hedging. profit or amortised loss cost Total IFRS 13 ‘Fair Value Measurement’ requires fair value measurements to be recognised using At 2 October 2021 £m £m £m afair value hierarchy that reflects the significance of the inputs used in the measurements, Assets as per the balance sheet according to the following levels: Contingent consideration 28.9 – 28.9 Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities. Finance lease receivables (before provision) – 22.3 22.3 Level 2 – inputs other than quoted prices included within Level 1 that are observable for the Trade receivables (before provision) – 10.2 10.2 asset or liability, either directly or indirectly. Other receivables (before provision) – 11.2 11.2 Level 3 – inputs for the asset or liability that are not based on observable market data. Other cash deposits – 3.2 3.2 The tables below show the level in the fair value hierarchy into which fair value measurements Cash and cash equivalents – 32.2 32.2 have been categorised: 28.9 79.1 108.0 2022 Liabilities Level 1 Level 2 Level 3 Total at fair Assets as per the balance sheet £m £m £m £m value | | Derivatives | | | through | | | Other | | | Derivative financial instruments – 5.1 – 5.1 | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | used for | | profit or | | financial | | | | | | | | | | | | | | | hedging | | | loss | liabilities | | | Total | | | | | 2022 | | | | | At 2 October 2021 | | | £m | | £m | | | £m | £m | | | | | | | | | | | | | | | | | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | | | | | | | | | | Liabilities as per the balance sheet | | £m | | £m | | £m | £m | Liabilities as per the balance sheet Derivative financial instruments 35.6 134.9 – 170.5 Derivative financial instruments – 25.5 – 25.5 Borrowings – – 1,639.3 1,639.3 2021 Trade payables – – 109.0 109.0 Level 1 Level 2 Level 3 Total Other payables – – 14.1 14.1 Assets as per the balance sheet £m £m £m £m 35.6 134.9 1,762.4 1,932.9 Contingent consideration – 28.9 – 28.9 2021 Level 1 Level 2 Level 3 Total Liabilities as per the balance sheet £m £m £m £m Derivative financial instruments – 170.5 – 170.5 There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior period. 144 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 25 FINANCIAL INSTRUMENTS CONTINUED The Level 2 fair values of derivative financial instruments have been obtained using a market approach and reflect the estimated amount the Group would expect to pay or receive on termination of the instruments, adjusted for the Group's own credit risk. The Group utilises valuations from counterparties who use a variety of assumptions based on market conditions existing at each balance sheet date. The fair values are highly sensitive to the inputs to the valuations, such as discount rates, analysis of credit risk and yield curves. The range of estimation uncertainty arising from these valuation inputs is considered to be up to £133.8 million, the largest movement observed over the last three periods. The Level 2 fair value of contingent consideration was obtained using a market approach and reflected the estimated amount the Group expected to receive. There was an agreed formula for the amount of contingent consideration to be received which referenced the recovery of the share price performance as at 30 October 2021 of a pre-agreed basket of companies to pre-COVID-19 levels. The final agreed consideration value calculated at 30 October 2021 was £28.2 million. The fair values of all the Group's other financial instruments are equal to their book values, with the exception of borrowings (note 20). The carrying amount less impairment provision of finance lease receivables, trade receivables and other receivables, and the carrying amount of other cash deposits, cash and cash equivalents, trade payables and other payables, are assumed to approximate their fair values. # Financial risk factors The Group's activities expose it to a variety of financial risks: market risk (including interest rate risk and foreign currency risk), counterparty risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by a central treasury department under policies approved by the Board. The treasury department identifies, evaluates and hedges financial risks. The Board sets principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit risk, investment of excess liquidity and use of derivative and non-derivative financial instruments. # Interest rate risk The Group's income and operating cash flows are substantially independent of changes in market interest rates, and as such the Group's interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing, and hedging. Based on these scenarios, the Group calculates the impact on the income statement of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions. The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises borrowings at floating rates and will often swap them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals, the difference between fixed contract and floating rate interest amounts calculated by reference to the agreed national amounts. If interest rates had been 0.5% higher/lower during the period ended 1 October 2022, with all other variables held constant, the post-tax profit for the period would have been £0.7 million (2021: £0.5 million) lower/higher as a result of higher/lower interest expense. # Interest rate swaps designated as part of a hedging relationship The Group uses interest rate swaps to fix the interest rate payable on the floating rate tranche of its securitised debt. The interest rate swap in respect of the AA tranche of securitised debt was designated as part of a hedging relationship in the current and prior period. This interest rate swap has the same critical terms as the associated securitised debt including reset dates, payment dates, maturities and notional amounts (note 21). The economic relationship between the forecast floating rate interest payments and the interest rate swap is determined and assessed through quantitative hedge effectiveness calculations performed at each reporting date, and upon a significant change in the circumstances affecting the hedge effectiveness requirements. As the interest rate swap has a notional amount profile the same as that of the principal amount profile of the securitised debt on which the floating rate interest is paid the hedge ratio is 1:1. Sources of ineffectiveness that might affect the hedging relationship are the Group's own credit risk, changes in the timing and amount of the interest payments and the recouponing of the swap from a single fixed rate to a stepped profile. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 ![img-8.jpeg](img-8.jpeg) STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 On 30 October 2017 the Group entered into a forward starting interest rate swap of £60.0 million to ### 25 FINANCIAL INSTRUMENTS CONTINUED fix the interest rate payable on the Group’s bank borrowings. This interest rate swap fixes interest at The fixed rate of this interest rate swap at 1 October 2022 was 6.0% (2021: 6.0%). 2.2% and commences on 30 April 2025. There are early termination dates of 30October 2022 and 2022 2021 1 November 2027. The final termination date is 30 April 2029. Subsequent to the balance sheet Interest rate swaps designated as part of a hedging relationship £m £m date, amendments to the terms of this interest rate swap were agreed; the early termination date Carrying amount of hedging instruments (included within derivative of 30 October 2022 was removed, the commencement date was brought forward to 30 October financialinstruments) 5.3 35.6 2022 and the rate at which interest is fixed was increased to 3.5%. Change in fair value of hedging instruments used as the basis for recognising On 27 March 2019 the Group recouponed the interest rate swap that fixes the interest rate hedge ineffectiveness in the period (22.6) (3.5) payable on the floating rate elements of its A2, A3 and B securitised notes. As a result, the Nominal amount of hedging instruments 130.9 141.7 hedging relationship between this interest rate swap and the associated debt ceased to meet Change in fair value of hedged items used as the basis for recognising the qualifying criteria for hedge accounting. The cumulative hedging loss existing in equity at hedgeineffectiveness in the period 23.9 5.9 27March 2019 remained in equity and is being recognised when the forecast transactions are Hedging reserve balance in respect of continuing hedges (0.3) (22.9) ultimately recognised in the income statement. Fair value movements in respect of this interest Hedging reserve balance in respect of discontinued hedges (50.4) (58.5) rate swap after 27 March 2019 are being recognised within the income statement. Hedging gains recognised in other comprehensive income 23.9 5.9 The interest rate risk profile, after taking account of derivative financial instruments, is as follows: Hedge ineffectiveness losses recognised in profit or loss (1.3) (2.4) 2022 2021 Amount reclassified from the hedging reserve to profit or loss in respect Floating Floating ofcontinuing hedges 6.2 7.2 | | | rate | Fixed rate | | | | rate | Fixed rate | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Amount reclassified from the hedging reserve to profit or loss in respect | financial | | financial | | | financial | | financial | | | | ofdiscontinued hedges 10.8 12.5 | liabilities | | liabilities | | Total | liabilities | | liabilities | | Total | | | | £m | | £m | £m | | £m | | £m | £m | Borrowings 531.7 1,121.1 1,652.8 516.7 1,152.3 1,669.0 2022 2021 Hedging reserve £m £m The weighted average interest rate of the fixed rate borrowings was 5.2% (2021: 5.2%) and the At beginning of the period (81.4) (108.7) weighted average period for which the rate is fixed was 14 years (2021: 15 years). Hedging gains recognised in other comprehensive income 23.9 5.9 Interest rate benchmark reform Amount reclassified from the hedging reserve to profit or loss 17.0 19.7 A fundamental reform of major interest rate benchmarks has been undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly Deferred tax on hedging reserve movements (10.2) 1.7 risk-free rates (referred to as ‘IBOR reform’). At end of the period (50.7) (81.4) The Group has transitioned its borrowings and interest rate swaps (which were indexed to Interest rate swaps not designated as part of a hedging relationship LIBOR) to Sterling Overnight Index Average (SONIA) rates with a credit spread. The Group On 22 March 2012 the Group entered into two forward starting interest rate swaps of applies the amendments to IFRS 9 ‘Financial Instruments’ to those financial instruments and £60.0million each to fix the interest rate payable on the Group’s bank borrowings. The hedging relationships directly affected by IBOR reform. The Group accounted for the change finaltermination date of one of the swaps is 30 June 2031 with fixed interest at 2.8% until to SONIA using the practical expedient introduced by the Interest Rate Benchmark Reform 30November 2020 and 4.0% thereafter. This swap has an early termination date of 30 March Phase 2 amendments, which allows the Group to change the basis for determining the 2024. The other swap with fixed interest at 3.9% was terminated on 2 November 2020. contractual cash flows prospectively by revising the effective interest rate. 146 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 Finance lease receivables, trade receivables and other receivables have been grouped as set ### 25 FINANCIAL INSTRUMENTS CONTINUED out below for the purpose of calculating the expected credit losses: Foreign currency risk Gross Loss allowance The Group buys and sells goods denominated in non-sterling currencies, principally US dollars, 2022 2021 2022 2021 Canadian dollars and euros. As a result, movements in exchange rates can affect the value of £m £m £m £m the Group’s income and expenditure. The Group’s exposure in this area is not considered to besignificant. Finance lease receivables Net investment in the lease 23.5 22.3 3.8 3.9 Counterparty risk The Group’s counterparty risk in respect of its cash and cash equivalents and other cash 23.5 22.3 3.8 3.9 deposits is mitigated by the use of various banking institutions for its deposits. Trade receivables There is no significant concentration of counterparty risk in respect of the Group’s pension Amounts due from current pub tenants 2.7 3.5 0.4 0.6 assets, as these are held with a range of institutions. Miscellaneous trade receivables 9.2 6.7 0.3 0.2 Credit risk 11.9 10.2 0.7 0.8 Credit risk is managed on a Group basis. Credit risk arises from credit exposure to customers, including outstanding receivables and committed transactions. If customers are independently Other receivables rated, these ratings are used. Otherwise, if there is no independent rating, an assessment is Amounts due from previous pub tenants 1.1 8.4 1.1 8.2 made of the credit quality of the customer, taking into account its financial position, past Amounts due from other property tenants 0.7 1.0 0.1 0.1 experience and other factors. Individual credit limits are set based on internal or external ratings Miscellaneous other receivables 1.0 1.8 0.1 0.1 in accordance with limits set by the Board. The utilisation of and adherence to credit limits is regularly monitored. 2.8 11.2 1.3 8.4 The financial assets of the Group which are subject to the expected credit loss model under 38.2 43.7 5.8 13.1 IFRS 9 ‘Financial Instruments’ comprise finance lease receivables, trade receivables and other | receivables. Other cash deposits and cash and cash equivalents are also subject to the | Expected credit losses have been calculated as follows: | | | | | | | --- | --- | --- | --- | --- | --- | --- | | impairment requirements of IFRS 9 however the impairment loss is immaterial. | | | Gross Loss allowance | | | | | | | 2022 | | 2021 | 2022 | 2021 | | | | £m | | £m | £m | £m | 12-month expected credit losses 1.0 1.8 0.1 0.1 Lifetime expected credit losses for trade and lease receivables 37.2 41.9 5.7 13.0 38.2 43.7 5.8 13.1 Finance lease receivables Finance lease receivables are lease receivables that result from transactions that are within the scope of IFRS 16 ‘Leases’ and as such the loss allowance is calculated as the lifetime expected credit losses. For tenants where it is considered that there is a significant risk of default the expected credit losses are calculated on an individual basis taking into account the circumstances involved. For all other tenants, after accounting for collateral held in the form of cash deposits and the value of the leased asset itself, the remaining balance due is low and as such the expected credit losses are minimal. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 147 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 The movements in the loss allowances for finance lease receivables, trade receivables and ### 25 FINANCIAL INSTRUMENTS CONTINUED other receivables are as follows: Amounts due from pub tenants Amounts due from current pub tenants result almost entirely from transactions that are within 2022 2021 the scope of IFRS 15 ‘Revenue from Contracts with Customers’ or are lease receivables that Finance lease receivables £m £m result from transactions that are within the scope of IFRS 16, and as such the loss allowance is At beginning of the period 3.9 2.9 calculated as the lifetime expected credit losses. After accounting for collateral held in the Net increase in loss allowance recognised in profit or loss 0.1 1.0 form of cash deposits the remaining balance due is low and as such the expected credit losses Amounts written off as uncollectible (0.2) – are minimal. At end of the period 3.8 3.9 Amounts due from previous pub tenants predominantly result from transactions that are within the scope of IFRS 15 or are lease receivables that result from transactions that are within the scope of IFRS 16 and as such the loss allowance is calculated as the lifetime expected credit 2022 2021 Trade receivables £m £m losses. The historical loss rate on closed accounts, adjusted to reflect current and forward- looking information regarding macroeconomic factors affecting customers’ ability to pay, At beginning of the period 0.8 0.5 such as the impact of COVID-19 and the cost-of-living crisis, is used to measure the expected Net (decrease)/increase in loss allowance recognised in profit or loss (0.1) 0.3 credit losses on these receivables. At end of the period 0.7 0.8 Miscellaneous trade receivables Miscellaneous trade receivables result almost entirely from transactions that are within the 12-month expected Lifetime expected scope of IFRS 15 and as such the loss allowance is calculated as the lifetime expected credit credit losses creditlosses losses. Due to the very low credit risk on the majority of these receivables the expected credit | | | 2022 | 2021 | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | | losses are minimal. | Other receivables | £m | £m | £m | £m | | Amounts due from other property tenants | At beginning of the period 0.1 0.2 8.3 8.5 | | | | | Amounts due from other property tenants are almost entirely lease receivables that result from Net (decrease)/increase in loss allowance recognised transactions that are within the scope of IFRS 16 and as such the loss allowance is calculated in profit or loss – (0.1) 0.1 – as the lifetime expected credit losses. For tenants where it is considered that there is a Amounts written off as uncollectible – – (7.2) (0.2) significant risk of default the expected credit losses are calculated on an individual basis At end of the period 0.1 0.1 1.2 8.3 taking into account the circumstances involved. For all other tenants, after accounting for collateral held in the form of cash deposits, the remaining balance due is low and as such the The Group has no significant concentration of credit risk in respect of its customers. expected credit losses are minimal. Themaximum exposure to credit risk at the reporting date is the carrying value of each class Miscellaneous other receivables ofreceivable. Miscellaneous other receivables do not generally result from transactions that are within the Liquidity risk scope of IFRS 15 and do not comprise lease receivables resulting from transactions that are The Group applies a prudent liquidity risk management policy, which involves maintaining within the scope of IFRS 16. These receivables are considered to have low credit risk and as sufficient cash, ensuring the availability of funding through an adequate amount of such the loss allowance is calculated as the 12-month expected credit losses. Receivables are committed credit facilities and having the ability to close out market positions. Due to the considered to have low credit risk where there is a low risk of default and it is expected that the dynamic nature of the underlying business, the Group maintains the availability of committed debtor will be able to meet its payment obligations in the near future. credit lines to ensure that it has flexibility in funding. 148 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 25 FINANCIAL INSTRUMENTS CONTINUED 26 SUBSIDIARY UNDERTAKINGS Management monitor rolling forecasts of the Group’s liquidity reserve (comprising undrawn Details of the Group’s subsidiary undertakings are provided in note 6 to the Company borrowing facilities and cash and cash equivalents) on the basis of expected cash flow. In financialstatements. addition, the Group’s liquidity management policy involves maintaining debt financing plans, ### projecting cash flows and considering the level of liquid assets necessary to meet these, and 27 SHARE-BASED PAYMENTS monitoring balance sheet liquidity ratios against internal and external regulatory requirements. During the period there were three classes of equity-settled employee share incentive The Group’s borrowing covenants are subject to regular review. plansoutstanding: The tables below analyse the Group’s financial liabilities and non-settled derivative financial (a) Save As You Earn (SAYE). Under this scheme employees enter into a savings contract for a instruments into relevant maturity groupings based on the remaining period at the balance period of three to five years and options are granted on commencement of the contract, sheet date to the contractual maturity date. The amounts disclosed in the tables are the exercisable using the amount saved under the contract at the time it terminates. Options contractual undiscounted cash flows. under the scheme are granted at a discount to the average quoted market price of the | | | | | Between | | Between | | | | | Company’s shares at the time of the invitation and are not subject to performance | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Less than | | | 1 and 2 | | 2 and 5 | | Over | | | conditions. Exercise of options is subject to continued employment. | | | | 1 year | | | years | | years | 5 years | Total | | | | At 1 October 2022 | | | £m | | £m | | £m | £m | £m | (b) Deferred bonus. Under this scheme nil cost options are granted to eligible employees in lieu | | of a cash bonus. Exercise of options is subject to a period of continued employment, and Borrowings 163.6 357.0 420.7 1,917.3 2,858.6 required no later than the tenth anniversary of the date of grant. Derivative financial instruments (9.4) (7.7) 2.8 84.4 70.1 (c) Long Term Incentive Plan (LTIP). Under this scheme nil cost options are granted that will Trade payables 95.5 – – – 95.5 onlyvest provided the participant satisfies the minimum shareholding requirement and Other payables 12.5 – – – 12.5 performance conditions relating to earnings per share, cash flow, return on capital, profit 262.2 349.3 423.5 2,001.7 3,036.7 before tax and relative total shareholder return are met. LTIP options are exercisable no later than the tenth anniversary of the date of grant. Between Between In 2010, HM Revenue & Customs (HMRC) approved an Approved Performance Share Plan Less than 1and 2and 5 Over (APSP) to enable participants in the LTIP to benefit from UK tax efficiencies. As such, awards 1year 2years years 5years Total made in 2010 and subsequent years may comprise an HMRC approved option (in respect of At 2 October 2021 £m £m £m £m £m the first £30,000 worth of an award) and an unapproved LTIP award for amounts in excess of Borrowings 134.7 116.3 572.9 1,956.4 2,780.3 this HMRC limit. A further share award (a linked award) is also provided to enable participants Derivative financial instruments 17.4 15.9 53.4 140.8 227.5 to fund the exercise of the approved option. This linked award is satisfied by way of shares held Trade payables 109.0 – – – 109.0 on trust, but these additional shares are not generally delivered to the participant. Under these Other payables 14.1 – – – 14.1 rules the LTIP options are still issued at nil cost to the employee. 275.2 132.2 626.3 2,097.2 3,130.9 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 149 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 The fair values of the SAYE, deferred bonus and LTIP rights are calculated at the date of grant ### 27 SHARE-BASED PAYMENTS CONTINUED using the Black-Scholes option-pricing model. The significant inputs into the model for all The tables below summarise the outstanding share options: schemes unless otherwise stated were: Weighted average Number of shares exercise price 2022 2021 2022 2021 2022 2021 Dividend yield % 2.1 to 2.2 – SAYE: m m p p Expected volatility % 36.1 to 45.6 75.0 to 85.4 Outstanding at beginning of the period 1.5 3.6 92.4 97.3 Risk-free interest rate % 0.5 to 2.0 0.1 to 0.3 Granted 7.6 – 44.0 – Expected life of rights Exercised – (0.1) – 89.2 SAYE 3 years N/A Expired (1.2) (2.0) 85.3 101.3 Deferred bonus N/A 3 years Outstanding at end of the period 7.9 1.5 46.7 92.4 LTIP 5 years 5 years Exercisable at end of the period 0.4 0.9 97.2 89.5 The expected volatility is based on historical volatility over the expected life of the rights. 44.0p to 89.0p to Range of exercise prices 110.0p 124.0p The fair value of options granted during the current period in relation to the SAYE was 12.2p Weighted average remaining contractual life (years) 3.3 0.8 (2021: no options granted). No options were granted in the current period (2021: fair value of options granted of 97.0p) in relation to the deferred bonus scheme. The fair value of options Weighted average granted during the period in relation to the LTIP was 64.5p (2021: 97.0p). Number of shares exercise price The weighted average share price for options exercised over the period was 67.8p (2021: 2022 2021 2022 2021 88.7p). The total charge for the period relating to employee share-based payment plans was Deferred bonus: m m p p £0.5 million (2021: £1.2 million), all of which related to equity-settled share-based payment Outstanding at beginning of the period 0.4 0.4 – – transactions. After tax, the total charge was £0.5 million (2021: £1.1 million). Granted – 0.3 – – | Exercised (0.1) (0.3) – – | 28 EQUITY SHARE CAPITAL | | | | | | | --- | --- | --- | --- | --- | --- | --- | | Outstanding at end of the period 0.3 0.4 – – | | | 2022 2021 | | | | | | | Number | | Value | Number | Value | Exercisable at end of the period – – – – Allotted, called up and fully paid m £m m £m Ordinary shares of 7.375p each: Weighted average | | Number of shares | | | exercise price | | | | At beginning and end of the period 660.4 48.7 660.4 48.7 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2022 | | 2021 | 2022 | | 2021 | | | | LTIP: | | m | m | | p | | p | | Outstanding at beginning of the period 7.6 7.3 – – Granted 4.6 2.5 – – Exercised (0.1) – – – Expired (2.9) (2.2) – – Outstanding at end of the period 9.2 7.6 – – Exercisable at end of the period – – – – 150 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 29 OTHER COMPONENTS OF EQUITY The merger reserve arose on the issue of ordinary shares in the period ended 30 September 2017 and represented the difference between the nominal value of the shares issued and the net proceeds received. Following the disposal of the Group's brewing operations in the prior period the remaining balance of the reserve was realised and consequently transferred to retained earnings. The capital redemption reserve of £6.8 million (2021: £6.8 million) arose on share buybacks. Own shares represent the carrying value of the investment in treasury shares and shares held on trust for employee share schemes (including executive share option schemes) as set out in the table below. The trustees of the schemes are Banks's Brewery Insurance Limited, a wholly-owned subsidiary of Marston's PLC, and Computershare Trustees (C.I.) Limited. | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Number m | Value £m | Number m | Value £m | | Shares held on trust for employee share schemes | 0.9 | 1.1 | 1.1 | 1.3 | | Treasury shares | 26.2 | 109.8 | 26.2 | 109.8 | | | **27.1** | **110.9** | **27.3** | **111.1** | The market value of own shares held is £9.7 million (2021: £22.8 million). Shares held on trust for employee share schemes represent 0.1% (2021: 0.2%) of issued share capital. Treasury shares held represent 4.0% (2021: 4.0%) of issued share capital. Dividends on own shares have been waived. The Group considers its capital to comprise total equity (as disclosed on the face of the Group balance sheet) and net debt (note 30). In managing its capital the primary objectives are to ensure that the Group is able to continue to operate as a going concern and to maximise return to shareholders through a combination of capital growth and distributions. The Group seeks to maintain a ratio of debt to equity that both balances risks and returns at an acceptable level and retains sufficient funds to comply with lending covenants, achieve working capital targets and meet investment requirements. The Board reviews the Group's dividend policy and funding requirements at least once a year. # 30 NET DEBT | Analysis of net debt | 2022 £m | 2021 £m | | --- | --- | --- | | **Cash and cash equivalents** | | | | Cash at bank and in hand | 27.7 | 32.8 | | | **27.7** | **32.8** | | **Financial assets** | | | | Other cash deposits | 3.0 | 3.0 | | | **3.0** | **3.0** | | **Debt due within one year** | | | | Bank borrowings | 0.7 | 0.7 | | Securitised debt | (39.0) | (36.0) | | Lease liabilities | (11.2) | (6.2) | | Other lease related borrowings | 0.4 | 0.4 | | Other borrowings | (15.0) | (25.0) | | | **(64.1)** | **(67.1)** | | **Debt due after one year** | | | | Bank borrowings | (214.6) | (188.6) | | Securitised debt | (601.3) | (640.3) | | Lease liabilities | (366.6) | (364.6) | | Other lease related borrowings | (338.0) | (337.0) | | Other borrowings | (40.0) | (40.0) | | Preference shares | (0.1) | (0.1) | | | **(1,560.6)** | **(1,571.6)** | | **Net debt** | **(1,594.0)** | **(1,603.0)** | Other cash deposits comprises deposits securing letters of credit for reinsurance contracts. Included within cash and cash equivalents is an amount of £5.6 million (2021: £5.6 million) relating to collateral held in the form of cash deposits. These amounts are both considered to be restricted cash. In addition, any other cash held in connection with the securitised business is governed by certain restrictions under the covenants associated with the securitisation (note 2). MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 | 30 NET DEBT CONTINUED | | | 31 WORKING CAPITAL AND NON-CASH MOVEMENTS | | | | --- | --- | --- | --- | --- | --- | | | 2022 | 2021 | | 2022 | 2021 | | Reconciliation of net cash flow to movement in net debt | £m | £m | Working capital movement | £m | £m | | Decrease in cash and cash equivalents in the period (4.5) (8.5) | | | Decrease in inventories 0.3 2.9 | | | | (Decrease)/increase in other cash deposits (0.2) 1.2 | | | Increase in trade and other receivables (7.4) (12.7) | | | | Disposals – 0.1 | | | (Decrease)/increase in trade and other payables (24.7) 3.4 | | | Cash outflow from movement in debt 30.9 125.3 (31.8) (6.4) Net cash inflow 26.2 118.1 Non-cash movements and deferred issue costs (16.3) (88.9) 2022 2021 Non-cash movements £m £m Disposals and classified as held for sale – (0.1) Movements in respect of property, plant and equipment, assets held for sale Movement in net debt in the period 9.9 29.1 and intangible assets (24.6) 84.6 Net debt at beginning of the period (1,603.9) (1,633.0) (Income)/loss from associates (3.3) 14.5 Net debt at end of the period (1,594.0) (1,603.9) Non-cash movements in respect of leases (3.0) 0.3 Share-based payments 0.5 1.2 2022 2021 (30.4) 100.6 £m £m Net debt excluding lease liabilities (1,216.2) (1,232.3) Further details of movements in respect of intangible assets, property, plant and equipment Lease liabilities (377.8) (371.6) and assets held for sale are given in notes 10, 11 and 19. Net debt (1,594.0) (1,603.9) ### 32 ORDINARY DIVIDENDS ON EQUITY SHARES Changes in liabilities arising from financing activities are as follows: No dividends were paid during the current or prior period. A final dividend for 2022 has not been proposed. 2022 2021 Derivative Total Derivative Total financial financing financial financing Borrowings instruments liabilities Borrowings instruments liabilities £m £m £m £m £m £m At beginning of the period (1,639.3) (170.5) (1,809.8) (1,675.6) (224.4) (1,900.0) Cash flow 30.9 16.3 47.2 125.3 40.3 165.6 Changes in fair value – 133.8 133.8 – 15.9 15.9 Other changes (16.3) – (16.3) (89.0) (2.3) (91.3) At end of the period (1,624.7) (20.4) (1,645.1) (1,639.3) (170.5) (1,809.8) 152 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 33 LEASES 2022 2021 £m £m The Group as lessee Interest expense on lease liabilities 18.9 17.7 The Group leases a number of its properties. Right-of-use assets in respect of leasehold land and Expenses relating to short-term leases 0.7 0.6 buildings with a term exceeding 100 years at acquisition/commencement of the lease or where Expenses relating to leases of low-value assets, excluding short-term leases there is an option to purchase the freehold at the end of the lease term for a nominal amount oflow-value assets 0.5 0.6 are classed as effective freehold land and buildings within property, plant and equipment. COVID-19 rent concessions recognised in profit or loss – 0.1 Right-of-use assets in respect of any other leasehold land and buildings are classed as leasehold Variable lease payments 0.1 – land and buildings within property, plant and equipment. The Group’s property leases have Income from subleasing right-of-use assets 1.4 0.6 various terms, escalation clauses and renewal rights. A number of the leases include variable payments that depend on changes in RPI, often subject to a cap and collar. Total cash outflow for leases 24.4 41.4 Additions to right-of-use assets 9.5 93.0 The Group also leases certain items of fixtures, fittings, tools and equipment. These are generally held under leases with terms of five years or less and in some cases contain an The table below analyses the Group’s lease liabilities into relevant maturity groupings based option to purchase the asset for a nominal amount at the end of the lease. on the remaining period at the balance sheet date to the contractual maturity date. | | 2022 | 2021 | Theamounts disclosed in the table are the contractual undiscounted cash flows. | | | | --- | --- | --- | --- | --- | --- | | Depreciation charge for right-of-use assets | £m | £m | | | | | | | | | 2022 | 2021 | Leasehold land and buildings 12.1 11.5 £m £m Fixtures, fittings, tools and equipment 0.2 0.2 Less than one year 30.4 25.4 12.3 11.7 Between one and two years 28.9 26.9 Between two and five years 85.5 83.2 | | 2022 | 2021 | | | | --- | --- | --- | --- | --- | | Carrying amount of right-of-use assets | £m | £m | Over five years 576.8 583.1 | | | Effective freehold land and buildings 112.5 62.2 | | | | 721.6 718.6 | Leasehold land and buildings 254.0 287.2 The Group as lessor Fixtures, fittings, tools and equipment 0.7 0.9 The Group leases a proportion of its licensed estate and other unlicensed properties to tenants. 367.2 350.3 The majority of lease agreements have terms of 21 years or less. For leases where the Group is the intermediate lessor certain subleases are classified as finance leases as the classification is determined by reference to the right-of-use asset arising from the head lease rather than the underlying asset. All other leases are classified as operating leases from a lessor perspective. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 153 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 33 LEASES CONTINUED Amounts recognised in the income statement are as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Finance income on the net investment in the lease | 0.9 | 0.9 | | Lease income for operating leases | 11.3 | 5.6 | The maturity analysis of the undiscounted lease payments to be received for finance leases is as follows: | Finance leases | 2022 £m | 2021 £m | | --- | --- | --- | | Within one year | 6.6 | 7.2 | | In more than one year but less than two years | 2.8 | 2.7 | | In more than two years but less than three years | 2.6 | 2.5 | | In more than three years but less than four years | 2.4 | 2.2 | | In more than four years but less than five years | 2.3 | 2.0 | | In more than five years | 13.8 | 10.7 | | | 30.5 | 27.3 | | Unearned finance income | (7.0) | (5.0) | | Net investment in the lease | 23.5 | 22.3 | The maturity analysis of the undiscounted lease payments to be received for operating leases is as follows: | Operating leases | 2022 £m | 2021 £m | | --- | --- | --- | | Within one year | 9.8 | 11.0 | | In more than one year but less than two years | 7.6 | 9.7 | | In more than two years but less than three years | 5.7 | 7.4 | | In more than three years but less than four years | 4.4 | 5.4 | | In more than four years but less than five years | 2.8 | 4.1 | | In more than five years | 11.1 | 17.0 | | | 41.4 | 54.6 | # 34 CONTINGENT LIABILITIES AND FINANCIAL COMMITMENTS The Group has issued letters of credit totalling £3.7 million (2021: £3.6 million) to secure reinsurance contracts; of which some of these letters of credit are secured on fixed deposits (note 30). The Group has also entered into a Deed of Guarantee with the Trustees of the Marston's PLC Pension and Life Assurance Scheme ('the Scheme') whereby it guarantees to the Trustees the ongoing obligations of the Group to contribute to the Scheme, and the obligations of the Group to contribute to the Scheme in the event of a debt becoming due under section 75 of the Pensions Act 1995 on the occurrence of either a Group company entering liquidation or the Scheme winding up. # 35 POST BALANCE SHEET EVENTS 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. The Group received the waivers required from its bank and private placement lenders. This Liquidity covenant required the Group's total Liquidity headroom to be no less than £75 million. The Group also obtained prospective waivers from its private placement provider for the fiscal months ending on or about 30 November 2022 and 31 December 2022 Liquidity covenants during November 2022 required as a result of the continued recovery from COVID-19 and the impact of Omicron in 2022. The terms of the Group's bank and private placement borrowings remain unchanged. 154 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### COMPANY BALANCE SHEET As at 1 October 2022 | | 1 October | | 2 October | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Note | | £m | | £m | Fixed assets Tangible assets 5 204.9 187.1 Investments 6 263.8 263.3 468.7 450.4 Current assets Debtors Amounts falling due within one year 7 255.7 523.7 Amounts falling due after more than one year 7 592.2 536.9 Cash at bank 2.2 3.0 850.1 1,063.6 Creditors Amounts falling due within one year 8 (475.6) (691.7) Net current assets 374.5 371.9 Total assets less current liabilities 843.2 822.3 Creditors Amounts falling due after more than one year 8 (159.1) (174.6) Provisions for liabilities 9 (4.7) (5.6) Net assets 679.4 642.1 Capital and reserves Equity share capital 13 48.7 48.7 Share premium account 14 334.0 334.0 Revaluation reserve 14 25.4 19.5 Capital redemption reserve 14 6.8 6.8 Own shares 14 (110.9) (111.1) Profit and loss reserves 375.4 344.2 Total equity 679.4 642.1 The profit of the Company for the 52 weeks ended 1 October 2022 was £29.8 million (2021: £234.1 million). 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 Company registration number: 31461 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 155 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # COMPANY STATEMENT OF CHANGES IN EQUITY For the 52 weeks ended 1 October 2022 | | Equity share capital £m | Share premium account £m | Revaluation reserve £m | Merger reserve £m | Capital redemption reserve £m | Own shares £m | Profit and loss reserves £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | At 4 October 2020 | 48.7 | 334.0 | 39.1 | 23.7 | 6.8 | (111.9) | 74.3 | 414.1 | | Profit for the period | – | – | – | – | – | – | 234.1 | 234.1 | | Revaluation of properties | – | – | (8.5) | – | – | – | – | (8.5) | | Deferred tax on properties | – | – | 0.5 | – | – | – | – | 0.5 | | Total comprehensive (expense)/income | – | – | (8.0) | – | – | – | 234.1 | 226.1 | | Share-based payments | – | – | – | – | – | – | 1.2 | 1.2 | | Sale of own shares | – | – | – | – | – | 0.8 | (0.7) | 0.7 | | Transfer to profit and loss reserves | – | – | (11.6) | (23.7) | – | – | 35.3 | 35.3 | | Total transactions with owners | – | – | (11.6) | (23.7) | – | 0.8 | 35.8 | 35.8 | | At 2 October 2021 | 48.7 | 334.0 | 19.5 | – | 6.8 | (111.1) | 344.2 | 642.1 | | Profit for the period | – | – | – | – | – | – | 29.8 | 29.8 | | Revaluation of properties | – | – | 8.9 | – | – | – | – | 8.9 | | Deferred tax on properties | – | – | (1.9) | – | – | – | – | (1.9) | | Total comprehensive income | – | – | 7.0 | – | – | – | 29.8 | 36.1 | | Share-based payments | – | – | – | – | – | – | 0.5 | 0.5 | | Sale of own shares | – | – | – | – | – | 0.2 | (0.2) | 0.2 | | Transfer to profit and loss reserves | – | – | (1.1) | – | – | – | 1.1 | 1.1 | | Total transactions with owners | – | – | (1.1) | – | – | 0.2 | 1.4 | 0.4 | | **At 1 October 2022** | **48.7** | **334.0** | **25.4** | **–** | **6.8** | **(110.9)** | **375.4** | **679.1** | 156 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES For the 52 weeks ended 1 October 2022 The Directors continue to adopt the going concern basis of accounting in preparing the ### 1 ACCOUNTING POLICIES financial statements. Details of the going concern assessment performed by the Group are The Company’s principal accounting policies are set out below: provided in note 1 to the Group financial statements. Company information Turnover Marston’s PLC is a public company limited by shares incorporated in England and Wales and Turnover represents rent receivable, which is recognised over time and in the period to which it domiciled in the UK. The registered office is Marston’s House, Brewery Road, Wolverhampton, relates. WV1 4JT. Current and deferred tax Basis of preparation The tax currently payable is based on taxable profit for the period. Taxable profit differs from These financial statements have been prepared in accordance with FRS 102 ‘The Financial net profit as reported in the accounts because it excludes items of income or expense that are Reporting Standard applicable in the UK and Republic of Ireland’ (FRS 102) and the taxable or deductible in other periods and it further excludes items that are never taxable or requirements of the Companies Act 2006. deductible. The Company’s liability for current tax is calculated using tax rates that have been The financial statements are prepared in sterling, which is the functional currency of the enacted or substantively enacted by the reporting end date. Company. Monetary amounts in these financial statements are rounded to the nearest Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets £0.1million. are recognised to the extent that it is probable that they will be recovered against the reversal of The financial statements have been prepared under the historical cost convention modified to deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised include the revaluation of effective freehold land and buildings and the holding of certain if the timing difference arises from goodwill or from the initial recognition of other assets and financial instruments at fair value. liabilities in a transaction that affects neither the tax profit nor the accounting profit. The Company is a qualifying entity for the purposes of FRS 102, as it prepares publicly available The carrying amount of deferred tax assets is reviewed at each reporting end date and consolidated financial statements, which are intended to give a true and fair view of the reducedto the extent that it is no longer probable that sufficient taxable profits will be available assets, liabilities, financial position and profit or loss of the Group. The Company has therefore to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that taken advantage of the exemptions from the following disclosure requirements in FRS 102: are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited • Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flows and related directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets notes and disclosures; and liabilities are offset when the Company has a legally enforceable right to offset current tax • Section 11 ‘Basic Financial Instruments’ – Interest income/expense and net gains/losses for assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same each category of financial instrument not measured at fair value through profit or loss, tax authority. impairment losses for each class of financial asset and information that enables users to evaluate the significance of financial instruments; • Section 26 ‘Share-based Payment’ – Reconciliation of the opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, and an explanation of modifications to arrangements; • Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel. These financial statements present information about the Company as an individual entity and not about its group. As permitted by section 408(3) of the Companies Act 2006, no profit and loss account has been presented for the Company. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 157 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 1 ACCOUNTING POLICIES CONTINUED Financial instruments The Company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ Fixed assets and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments. • Land and buildings which are either freehold or are in substance freehold assets are Financial instruments are recognised in the balance sheet when the Company becomes party classed as effective freehold land and buildings. This includes leasehold land and buildings to the contractual provisions of the instrument. 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. Financial assets and liabilities are offset, with the net amounts presented in the financial Allother leasehold land and buildings are classed as leasehold land and buildings. statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability • Effective freehold land and buildings are initially stated at cost and subsequently at simultaneously. valuation. Leasehold land and buildings and fixtures, fittings, plant and equipment are stated at cost. Basic financial assets Basic financial assets, which comprise amounts owed by Group undertakings, other debtors and • Depreciation is charged to the profit and loss account on a straight-line basis to provide for cash and cash equivalents, are initially measured at the transaction price including transaction the cost or valuation of the assets less their residual values over their useful lives. costs and are subsequently carried at amortised cost using the effective interest method. • Land and buildings are depreciated to their residual values over the lower of the lease term Other financial assets (where applicable) and 50 years. Derivatives, including interest rate swaps, are not basic financial assets and are accounted for • Fixtures, fittings, plant and equipment are depreciated over seven years. as set out below. • Interest costs directly attributable to capital projects are capitalised. Financial assets, other than those held at fair value through profit or loss, are assessed for indicators of impairment at each reporting end date. 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 Financial assets are impaired where there is objective evidence that, as a result of one or more from its fair value at the balance sheet date. The annual valuations are determined via events that occurred after the initial recognition of the financial asset, the estimated future third-party inspection of approximately a third of the sites such that all sites are individually cash flows have been affected. If an asset is impaired, the impairment loss is the difference inspected every three years. Substantially all of the Company’s effective freehold land and between the carrying amount and the present value of the estimated cash flows discounted buildings have been valued by a third-party in accordance with the Royal Institution of at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss. Chartered Surveyors’ Red Book. These valuations are performed directly by reference to If there is a decrease in the impairment loss arising from an event occurring after the impairment observable prices in an active market or recent market transactions on arm’s length terms. was recognised, the impairment is reversed. The reversal is such that the current carrying amount Internal valuations are performed on the same basis. does not exceed what the carrying amount would have been, had the impairment not When a valuation is below current carrying value, the asset concerned is reviewed for previously been recognised. The impairment reversal is recognised in profit or loss. impairment. Impairment losses are charged to the revaluation reserve to the extent that a Financial assets are derecognised only when the contractual rights to the cash flows from the previous gain has been recorded, and thereafter to the profit and loss account. Surpluses asset expire or are settled, or when the Company transfers the financial asset and substantially onrevaluation are recognised in the revaluation reserve, except to the extent they reverse all the risks and rewards of ownership to another entity. previously charged impairment losses, in which case the reversal is recorded in the profit and lossaccount. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a Disposals of fixed assets residual interest in the assets of the Company after deducting all of its liabilities. Profit/loss on disposal of fixed assets represents net sale proceeds less the carrying value of theassets. Any element of the revaluation reserve relating to the fixed assets disposed of is transferred to profit and loss reserves at the date of sale. 158 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 Obligations arising from sale and leaseback arrangements with repurchase options that do ### 1 ACCOUNTING POLICIES CONTINUED not fall within the scope of Section 20 ‘Leases’ of FRS 102 are classified as other lease related Basic financial liabilities borrowings and accounted for as secured loans on an amortised cost basis. Basic financial liabilities, comprising amounts owed to Group undertakings, other creditors and borrowings, are initially recognised at the transaction price and subsequently carried at Investments in subsidiaries amortised cost using the effective interest method. Interests in subsidiaries are initially measured at cost and subsequently measured at cost less Other financial liabilities any accumulated impairment losses. The investments are assessed for impairment at each Derivatives, including interest rate swaps, are not basic financial liabilities and are accounted reporting date and any impairment losses or reversals of impairment losses are recognised for as set out below. immediately in profit or loss. Financial liabilities are derecognised when the Company’s contractual obligations expire or are discharged or cancelled. Provisions Provisions are recognised in the balance sheet when the Company has a present legal Derivatives orconstructive obligation as a result of a past event and it is probable that an outflow of The Company uses derivative financial instruments to hedge the Group’s exposure to economic benefits will be required to settle the obligation. fluctuations in interest rates. Derivative financial instruments are initially recognised in the The amount recognised as a provision is the best estimate of the consideration required to balance sheet at fair value and are subsequently remeasured to their fair value at each settle the present obligation at the balance sheet date, taking into account the risks and balance sheet date. The Company has not designated any derivative financial instruments as uncertainties surrounding the obligation. hedging instruments and as such any gains or losses on remeasurement are recognised in the profit and loss account immediately. Where the effect of the time value of money is material, the amount expected to be required tosettle the obligation is recognised at present value, using a pre-tax rate that reflects current A derivative with a positive fair value is recognised as a financial asset, whereas a derivative market assessments of the time value of money and the risks specific to the obligation for which with a negative fair value is recognised as a financial liability. the estimates of future cash flows have not been adjusted. When a provision is measured at present value the unwinding of the discount is recognised as a finance cost in profit or loss in Leases theperiod it arises. Leases are classified as finance leases whenever the terms of the lease transfer substantially allthe risks and rewards of ownership to the lessee. All other leases are classified as operating Dividends leases. Dividends proposed by the Board but unpaid at the period end are recognised in the financial Assets held under finance leases are recognised as assets at the lower of the assets’ fair value statements when they have been approved by the shareholders. Interim dividends are at the date of inception of the lease and the present value of the minimum lease payments. recognised when paid. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged Preference shares tothe profit and loss account so as to produce a constant periodic rate of interest on the Preference shares are treated as borrowings, and dividends payable on those preference remaining balance of the liability. shares are charged as interest in the profit and loss account. Rentals payable under operating leases, including any lease incentives received, are charged to the profit and loss account on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Lease premiums received are recognised on a straight-line basis over the life of the lease. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 159 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 ### 1 ACCOUNTING POLICIES CONTINUED Valuation of interest rate swaps The Company’s interest rate swaps are held at fair value. The Company utilises valuations from Group undertakings counterparties who use a variety of assumptions based on market conditions existing at each There is an intra group funding agreement in place between the Company and certain balance sheet date. The fair values are highly sensitive to the inputs to the valuations, such as othermembers of the Group. This agreement stipulates that all balances outstanding on any discount rates, analysis of credit risk and yield curves. intercompany loan account between these companies which exceed £1 are interest bearing The carrying amount of the interest rate swaps is shown in note 10. at a prescribed rate. There is a 12.5% subordinated loan owed to the Company by Marston’s Pubs Limited and ### 3 AUDITOR’S REMUNERATION thereare deep discount bonds owed by the Company to Banks’s Brewery Insurance Limited. Fees payable to the Company’s Auditor for the audit of the Company’s annual accounts are Nointerest is payable on any other amounts owed by/to Group companies who are not party to disclosed in note 3 to the Group financial statements. Fees paid to the Company’s Auditor for the intra group funding agreement. non-audit services to the Company itself are not required to be disclosed as the Group All amounts owed by/to Group undertakings are unsecured and, with the exception of the financial statements disclose such fees on a consolidated basis. subordinated loan and deep discount bonds, repayable on demand. ### 4 EMPLOYEES ### 2 JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The average monthly number of people employed by the Company during the period was nil In the application of the Company’s accounting policies, the Directors are required to make (2021: nil). judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods. The following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities: Tangible fixed assets The Company carries its effective freehold land and buildings at fair value. These properties are valued by external or internal valuers on an open market value basis, primarily using earnings multiples derived from prices in observed transactions involving comparable businesses. The estimation of the fair values requires a combination of assumptions, includingfuture earnings and appropriate multiples. The carrying amount of tangible fixed assets is shown in note 5. 160 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 The net book amount of land and buildings is split as follows: ### 5 TANGIBLE FIXED ASSETS | Effective | | | | | Fixtures, | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | 2022 | 2021 | | freehold | | Leasehold | | | fittings, | | | | | | | | | | | | | | | | £m | £m | | land and | | land and | | plant and | | | | | | | | buildings | | buildings | | equipment | | | Total | Freehold land and buildings 138.6 123.9 | | | | | £m | | £m | | | £m | £m | | | | Leasehold land and buildings with a term greater than 100 years at acquisition/commencement 54.1 48.1 Cost or valuation Leasehold land and buildings with a term less than 100 years at acquisition/ At 3 October 2021 172.0 32.9 1.2 206.1 commencement 11.5 14.2 Additions 7.8 1.5 – 9.3 204.2 186.2 Transfers to/from Group undertakings (6.3) – – (6.3) Revaluation 19.6 – – 19.6 If the effective freehold land and buildings had not been revalued, the historical cost net book Disposals (0.4) (3.2) – (3.6) amount would be £159.4 million (2021: £146.6 million). At 1 October 2022 192.7 31.2 1.2 225.1 Capital expenditure authorised and committed at the period end but not provided for in the financial statements was £0.3 million (2021: £0.4 million). Depreciation The net book amount of effective freehold land and buildings held under finance leases at 1October 2022 was £19.1 million (2021: £15.3 million). The net book amount of effective freehold At 3 October 2021 – 18.7 0.3 19.0 land and buildings held as part of sale and leaseback arrangements that do not fall within the Charge for the period – 1.1 0.2 1.3 scope of Section 20 ‘Leases’ of FRS 102 was £92.6 million (2021: £80.7 million). The net book Impairment – 3.1 – 3.1 amount of fixtures, fittings, plant and equipment held under finance leases was £0.7 million Disposals – (3.2) – (3.2) (2021: £0.9 million). At 1 October 2022 – 19.7 0.5 20.2 The Company has charged effective freehold land and buildings with a value of £4.1 million (2021: £3.3 million) in favour of the Marston’s PLC Pension and Life Assurance Scheme (the‘Scheme’) as continuing security for the Group’s obligations to the Scheme. Net book amount at 2 October 2021 172.0 14.2 0.9 187.1 Net book amount at 1 October 2022 192.7 11.5 0.7 204.9 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 161 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # 5 TANGIBLE FIXED ASSETS CONTINUED # Revaluation/impairment At 3 July 2022 independent chartered surveyors revalued the Company's effective freehold properties on an open market value basis. During the current and prior period various properties were also reviewed for impairment and/or material changes in value. These valuation adjustments were recognised in the revaluation reserve or profit and loss account as appropriate. | | 2022 £m | 2021 £m | | --- | --- | --- | | **Profit and loss account:** | | | | Impairment | (5.2) | (16.1) | | Reversal of past impairment | 12.8 | 1.5 | | | 7.6 | (14.6) | | **Revaluation reserve:** | | | | Unrealised revaluation surplus | 10.0 | 3.0 | | Reversal of past revaluation surplus | (1.1) | (11.5) | | | 8.9 | (8.5) | | Net increase/(decrease) in shareholders' equity/tangible fixed assets | 16.5 | (23.1) | # 6 FIXED ASSET INVESTMENTS | | Subsidiary undertakings £m | | --- | --- | | **Cost** | | | At 3 October 2021 | 263.0 | | Capital contribution in respect of equity-settled share-based payments | 0.0 | | **At 1 October 2022** | **263.0** | | Net book amount at 2 October 2021 | 263.0 | | **Net book amount at 1 October 2022** | **263.0** | Where there are indications of impairment or reversal of impairment of the Company's investments in subsidiary undertakings an assessment is made of the recoverable amounts of the investments, which are based on either the net assets of the subsidiary or value in use calculations. Where a value in use calculation is used, cash flows have been derived from the latest board approved cash flows of the relevant entity, applying a long-term growth rate of 1.8% (2021: 1.5%) and discounted at a rate of 7.1% (2021: 6.5%). These financial statements are separate company financial statements for Marston's PLC. 162 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 Proportion of ### 6 FIXED ASSET INVESTMENTS CONTINUED | | | shares held | Proportion of | | --- | --- | --- | --- | | The Company had the following subsidiary undertakings at 1 October 2022: | | directly by | shares held by | | | Nature of business Class of share | Marston’s PLC | the Group | Proportion of shares held Proportion of Pitcher and Piano Limited Dormant Ordinary £1 – 100% directly by shares held by Porter Black (2003) Limited Dormant Ordinary £1 – 100% Nature of business Class of share Marston’s PLC the Group QP Bars Limited Dormant Ordinary £1 – 100% Marston’s Estates Limited Property Refresh Group Limited * Dormant Ordinary 1p – 100% management Ordinary 25p – 100% Refresh UK Limited * Dormant Ordinary 10p – 100% Marston’s Operating Limited Pub retailer Ordinary £1 – 100% Ringwood Brewery Limited * Dormant Ordinary £1 – 100% Marston’s Pubs Limited Pub retailer Ordinary £1 – 100% S.K. Williams Limited * Dormant Ordinary £1 – 100% Marston’s Pubs Parent Limited Holding company Ordinary £1 – 100% SDA Limited * Dormant Ordinary £1 – 100% Marston’s Telecoms Limited Telecommunications Ordinary £1 – 100% Sherwood Forest Properties Limited Dormant Ordinary £1 – 100% Marston’s Trading Limited Pub retailer Ordinary £5 – 100% Sovereign Inns Limited * Dormant Ordinary £1 – 100% Banks’s Brewery Insurance Limited Insurance Ordinary £1 – 100% The Gray Ox Limited * Dormant Ordinary £1 – 100% Marston’s Acquisitions Limited Acquisition company Ordinary 25p – 100% The Wychwood Brewery Company Limited * Dormant Ordinary £1 – 100% Preference £1 – 100% W&DB (Finance) Limited Dormant Ordinary £1 – 100% Marston’s Corporate Holdings Limited Holding company Ordinary £1 100% 100% W. & D. Limited * Dormant Ordinary £1 – 100% Marston’s Issuer PLC Financing company Ordinary £1 – – Wizard Inns Limited Dormant ‘A’ Ordinary 1p – 100% Marston’s Issuer Parent Limited Holding company Ordinary £1 – – Deferred 1p – 100% Bedford Canning Company Limited * Dormant Ordinary £1 – 100% Wychwood Holdings Limited * Dormant ‘A’ Ordinary 1p – 100% Bluu Limited * Dormant Ordinary £1 – 100% Brasserie Restaurants Limited Dormant Ordinary £1 – 100% * An application to strike off and dissolve these companies was submitted to Companies House prior to the date Celtic Inns Holdings Limited Dormant Ordinary 1p – 100% of issuance of these financial statements. Celtic Inns Limited Dormant Ordinary £1 – 100% The registered office of all of the above subsidiaries is Marston’s House, Brewery Road, Eldridge, Pope & Co., Limited Dormant Ordinary 50p – 100% Wolverhampton, WV1 4JT, with the exception of Banks’s Brewery Insurance Limited, Marston’s English Country Inns Limited Dormant Ordinary 50p – 100% Issuer PLC and Marston’s Issuer Parent Limited. The registered office of Banks’s Brewery Insurance EP Investments 2004 Limited * Dormant Ordinary 1p – 100% Limited is PO Box 33, Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 4AT. The registered Fairdeed Limited * Dormant ‘A’ Ordinary £1 – 100% office of Marston’s Issuer PLC and Marston’s Issuer Parent Limited is Wilmington Trust SP Services (London) Limited, Third Floor, 1 King’s Arms Yard, London, EC2R 7AF. Fayolle Limited Dormant Ordinary £1 – 100% John Marston’s Taverners Limited Dormant Ordinary £1 – 100% All subsidiaries have been included in the consolidated financial statements. Although the Lambert Parker & Gaines Limited Dormant Ordinary £1 – 100% Group does not hold any shares in Marston’s Issuer PLC and its parent company, Marston’s Mansfield Brewery Limited Dormant Ordinary 25p – 100% Issuer Parent Limited, these companies are treated as subsidiary undertakings for the purpose of the consolidated financial statements as it is considered that they are controlled by the Mansfield Brewery Properties Limited * Dormant Ordinary £1 – 100% Group. Marston’s Issuer PLC was set up with the sole purpose of issuing debt secured on the Mansfield Brewery Trading Limited Dormant Ordinary £1 – 100% assets of Marston’s Pubs Limited. Wilmington Trust SP Services (London) Limited holds the shares Marston, Thompson & Evershed Limited Dormant Ordinary 25p – 100% of Marston’s Issuer Parent Limited under a declaration of trust for charitable purposes. Marston’s Developments Limited * Dormant Ordinary £1 – 100% Marston’s Property Developments Limited Dormant Ordinary £1 – 100% Osprey Inns Limited Dormant Ordinary £1 – 100% MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 163 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 | 6 FIXED ASSET INVESTMENTS CONTINUED | 8 CREDITORS | | | | --- | --- | --- | --- | | The Company had the following associates at 1 October 2022: | | 2022 | 2021 | | | Amounts falling due within one year | £m | £m | Proportion of shares Amounts owed to Group undertakings 449.4 673.2 | | | | held | Proportion | | | --- | --- | --- | --- | --- | --- | | | | directly by | | of shares | Finance leases 0.9 0.5 | | Nature of | Class of | Marston’s | | held by the | | Other lease related borrowings (0.1) (0.1) business share PLC Group Corporation tax 15.4 10.0 Carlsberg Marston’s Limited Brewer Ordinary £1 – 40% Accruals and deferred income 9.6 7.3 (formerly Carlsberg Marston’s Brewing Company Limited) Other creditors 0.4 0.8 The registered office of Carlsberg Marston’s Limited (formerly Carlsberg Marston’s Brewing 475.6 691.7 Company Limited) is Marston’s House, Brewery Road, Wolverhampton, WV1 4JT. | | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | | 7 DEBTORS | | | Amounts falling due after more than one year | £m | £m | | | 2022 | 2021 | Finance leases 19.5 20.0 | | | | Amounts falling due within one year | £m | £m | | | | Other lease related borrowings 88.5 88.3 Amounts owed by Group undertakings 252.3 520.5 Other borrowings 40.0 40.0 Prepayments and accrued income 0.1 – Preference shares 0.1 0.1 Other debtors 3.3 3.2 Derivative financial instruments 1.8 15.4 255.7 523.7 Accruals and deferred income 9.2 10.2 Other creditors – 0.6 2022 2021 159.1 174.6 Amounts falling due after more than one year £m £m 12.5% subordinated loan owed by Group undertaking 590.4 521.5 The preference shares carry the right to a fixed cumulative preferential dividend. They participate in the event of a winding-up and on a return of capital and carry the right to attend and vote at Derivative financial instruments 1.8 15.4 general meetings of the Company, carrying four votes per share. 592.2 536.9 Other lease related borrowings represent amounts due under sale and leaseback arrangements The gross contractual amount outstanding in respect of the subordinated loan was £1,490.4 that do not fall within the scope of Section 20 ‘Leases’ of FRS 102. The Company has an option to million (2021: £1,316.6 million) and the impact of discounting the expected cash flows at 12.5% repurchase each leased property for a nominal amount at the end of the lease. The leases have was £900.0 million (2021: £795.1 million). terms of 35 to 40 years and rents which are linked to RPI, subject to a cap and collar. The amount falling due for payment after more than five years from the balance sheet date on debts repayable by instalments was £107.1 million (2021: £107.3 million). Debts of £0.1 million (2021: £0.1 million) were repayable otherwise than by instalments after more than five years from the balance sheet date. 164 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### NOTES CONTINUED For the 52 weeks ended 1 October 2022 | 9 PROVISIONS FOR LIABILITIES | | | | | | 10 FINANCIAL INSTRUMENTS | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Deferred | | Property | | | | 2022 | 2021 | | | | tax | leases | | Total | Carrying amount of financial assets | £m | £m | | | | £m | | £m | £m | | | | Measured at fair value through profit or loss 1.8 15.4 At 3 October 2021 0.4 5.2 5.6 Provided in the period – 0.9 0.9 | | | 2022 | 2021 | | --- | --- | --- | --- | | Released in the period – (0.5) (0.5) | Carrying amount of financial liabilities | £m | £m | | Utilised in the period – (1.4) (1.4) | Measured at fair value through profit or loss 1.8 15.4 | | | Unwind of discount – 0.1 0.1 The only financial instruments that the Company holds at fair value are interest rate swaps. Adjustment for change in discount rate – (0.6) (0.6) Thefair values of the Company’s interest rate swaps are obtained using a market approach and Credited to profit or loss (1.3) – (1.3) reflect the estimated amount the Company would expect to pay or receive on termination of Charged to other comprehensive income 1.9 – 1.9 the instruments, adjusted for the Company’s own credit risk. The Company utilises valuations from counterparties who use a variety of assumptions based on market conditions existing at At 1 October 2022 1.0 3.7 4.7 each balance sheet date. Payments are expected to continue in respect of these property leases for periods of 1 to 22 ### 11 OPERATING LEASE COMMITMENTS years (2021: 1 to 23 years). There is not considered to be any significant uncertainty regarding the amount and timing of these payments. At 1 October 2022 the Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases as follows: Deferred tax | | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | | The amount provided in respect of deferred tax is as follows: | | | | £m | £m | | | 2022 | 2021 | Within one year 6.4 7.0 | | | | | £m | £m | | | | In more than one year but less than five years 21.6 20.9 Excess of capital allowances over accumulated depreciation 6.1 4.2 In more than five years 43.8 47.6 Other (5.1) (3.8) 71.8 75.5 1.0 0.4 A deferred tax asset of £7.7 million (2021: £10.0 million) arising on capital losses has not been recognised due to uncertainty over its future recoverability. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 165 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # NOTES CONTINUED For the 52 weeks ended 1 October 2022 # **12 FINANCE LEASE OBLIGATIONS** The Company leases various properties and items of equipment under finance leases. The leases have various terms, escalation clauses and renewal rights. Future minimum lease payments under finance leases are as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Within one year | 1.9 | 1.6 | | In more than one year but less than five years | 5.6 | 5.8 | | In more than five years | 29.7 | 31.0 | | | **37.2** | **38.4** | | Future finance charges | **(16.8)** | **(17.9)** | | Present value of finance lease obligations | **20.4** | **20.5** | # **13 EQUITY SHARE CAPITAL** | Allotted, called up and fully paid | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Number m | Value £m | Number m | Value £m | | Ordinary shares of 7.375p each | **660.4** | **48.7** | 660.4 | 48.7 | # **14 RESERVES** The share premium account comprises amounts in excess of nominal value received for the issue of shares less any transaction costs. When effective freehold land and buildings are revalued any gains and losses are recognised in the revaluation reserve, except to the extent that a revaluation gain reverses a revaluation loss previously recognised in profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in the revaluation reserve; such gains and losses are recognised in profit or loss. The associated deferred tax on revaluations is also recognised in the revaluation reserve. Amounts representing the equivalent depreciation are transferred to profit and loss reserves annually and the full amount is transferred on disposal of the associated property. The capital redemption reserve arose on share buybacks. Details of own shares are provided in note 29 to the Group financial statements. # **15 GUARANTEES AND CONTINGENT LIABILITIES** The Company has entered into a Deed of Guarantee with Marston's Trading Limited ("Trading") and the Trustees of the Marston's PLC Pension and Life Assurance Scheme ("the Scheme") whereby it guarantees to the Trustees the ongoing obligations of Trading to contribute to the Scheme and the obligations of Trading to contribute to the Scheme in the event of a debt becoming due under section 75 of the Pensions Act 1995 on the occurrence of either Trading entering liquidation or the Scheme winding up. The Company has guaranteed the obligations of Trading under certain of its banking facilities and the obligations of Marston's Estates Limited under various property leases. 166 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### ALTERNATIVE PERFORMANCE MEASURES Abbreviations LFL sales LFL sales reflect sales for all pubs that were trading in the two periods being compared APM Alternative performance measure expressed as a percentage, excluding those pubs that have changed format between CAPEX Capital expenditure tenanted and leased and the rest of the estate. The inclusion of a pub within LFL sales is considered on a daily basis and a pub is included within LFL sales for the specific days within EBITDA Earnings before interest, tax, depreciation, and amortisation the two periods being compared where it meets the definition of LFL. A site is considered fully FCF Free cash flow open for trading if it generated more than £100 per day. Current period comparisons have LFL Like-for-like been made against FY2019, being the relevant pre-COVID comparator period, and therefore LFL sales excludes the results of the SA Brain pubs. NAV Net asset value LFL sales is a widely used industry measure which provides better insight into the trading NCF Net cash flow performance of the Group as total revenue is impacted by acquisitions, disposals, and investment into the estate through conversions and refurbishments. Definitions NAV per share APMs NAV per share is the value of net assets of the Group, divided by the number of shares outstanding. In addition to statutory financial measures, these full year results include financial measures that are not defined or recognised under IFRS or FRS 102, all of which the Group considers NCF tobe APMs. APMs should not be regarded as a complete picture of the Group’s financial NCF is the decrease in cash and cash equivalents in the period, adjusted for movements in performance, which the Group presents within its total statutory results. other cash deposits, cash disposed of, and the cash movement in debt. NCF is used by the Group to determine targets for LTIP awards. The APMs are used by the Directors to analyse operational and financial performance and track the Group’s progress against long-term strategic plans. The APMs provide additional Net debt information to investors and other external shareholders to enhance their understanding of the Net debt is defined as the sum of cash and cash equivalents and other cash deposits, less total Group’s results and comparison with industry peers. borrowings, at the balance sheet date. Net debt is presented excluding lease liabilities as the target for the Group’s ‘Back to a billion’ corporate goal is to reduce net debt excluding lease CAPEX liabilities to below £1 billion. Capex is the cost of acquiring and maintaining fixed assets, comprising both maintenance and investment expenditure. It is a measure by which the Group and interested stakeholders assess Non-underlying the level of investment in the estate to maintain the Group’s profit. Capex is the purchase of Non-underlying items are presented separately on the face of the income statement and are property, plant and equipment as presented directly within the Group cash flow statement. 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 FCF users of the financial statements to better understand elements of financial performance in the FCF represents the net cash inflow from operating activities, adjusted for cash movements on period, so as to facilitate comparison with future and prior periods. As management of the interest, and proceeds from the sale of own shares. The Group uses FCF to determine bonus freehold and leasehold property estate is an essential and significant area of the business, the outcomes for Directors’ remuneration. threshold for classification of property related items as non-underlying is higher than other items. Underlying results should not be regarded as a complete picture of the Group’s financial performance as they exclude specific items of income and expense. The full Group financial performance is presented within its total statutory results. MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 167 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### ALTERNATIVE PERFORMANCE MEASURES CONTINUED Operating profit/(loss) Reconciliation of APMs to Marston’s strategy Operating profit/(loss) is total revenue less operating expenses, plus the share of results from associates. Operating profit/(loss) is presented directly on the Group income statement. It is not APM Closest equivalent Link to corporate strategy Link to ESG strategy defined in IFRS, however it is a generally accepted profit measure. ‘Pub operating profit/(loss)’ statutory measure or goal excludes the share of results from associates. | | LFL sales Revenue Back to a billion (goal) | | Communities | | --- | --- | --- | --- | | Outlet sales | | Achieving £1 billion sales | We want to generate | | Outlet sales represents all revenue that is generated at our managed and franchise pubs, | | | additional income to | increase our charitable which includes food, drink, accommodation, and gaming machine income. donations. Profit/(loss) before tax Capex Purchase of property, We will grow (strategy) Environment Profit/(loss) before tax is profit for the period for continuing operations presented before the tax plant and equipment Links to the third element We want to generate high charge for the period. Profit/(loss) before tax is presented directly on the Group income and assets held for sale of our strategy to deliver returns on energy efficient statement. It is not defined in IFRS, however is a generally accepted profit measure. high returning growth technology expenditure. capex. Retail sales FCF Net cash flow from We will grow (strategy) Investors Retail sales represents all revenue that is generated through the Group’s EPOS (electronic point operating activities Links to the third element We want to attract of sale) till systems in our managed and franchise pubs, which includes food, drink, and of our strategy to exploit long-term equity and accommodation sales. NCF Net increase/ M&A opportunities. debt investors who (decrease) in cash believe in and support our Underlying EBITDA andcash equivalents strategy. Underlying EBITDA is the earnings before interest, tax, depreciation, and amortisation, adjusted Net debt Total debt Back to a billion (goal) Investors for non-underlying items. The Directors regularly use underlying EBITDA as a key performance Reducing net debt We want to drive measure in assessing the Group’s profitability. The measure is considered useful to users of the (excluding lease liabilities) shareholder value by financial statements as it is a widely used industry measure which allows comparison to peers, to below £1 billion. reducing borrowings to comparison of performance across periods, and is used to determine bonus outcomes for below £1 billion. Directors’ remuneration. Underlying Operating profit We raise the bar (strategy) Environment Underlying operating margin operating Links to the second We want to improve margin element of our strategy, to profitability by reducing Underlying operating margin is the percentage of operating profit, before non-underlying achieve operational our energy usage. items, against total revenue. Underlying Profit/(loss) before tax excellence. EBITDA Wholesale sales Wholesale sales represents revenue generated from our tenanted and leased pubs. Year The current year refers to the 52 week period ended 1 October 2022. The prior year refers to the 52 week period ended 2 October 2021. 168 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### ALTERNATIVE PERFORMANCE MEASURES CONTINUED Reconciliation of APMs to statutory results FCF 2022 2021 LFL sales | | | | | | | | | Statutory reference | £m | £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 52 weeks to | | | 52 weeks to | | | | | | | | | 1October | | 28September | | | | Net cash inflow from operating activities Cash flow statement 134.0 34.7 | | | | | Statutory | | 2022 | | | 2019 | LFL | | | | | Interest received Cash flow statement 0.9 0.5 reference £m £m % Interest paid Cash flow statement (79.4) (96.3) LFL retail sales 630.6 639.2 (1) Proceeds from sale of own shares Cash flow statement – 0.1 Non-LFL retail sales 103.5 61.7 Free cash flow 55.5 (61.0) Retail sales 734.1 700.9 Non-EPOS outlet sales 23.1 21.9 NAV per share 2022 2021 Outlet sales Note 3 757.2 722.8 | | | | | Statutory reference | £m | £m | | --- | --- | --- | --- | --- | --- | --- | | | | 10 weeks to | Net assets Balance Sheet 648.1 406.4 | | | | | 10 weeks to | 28September | | | | | | Basic weighted average number of shares Note 9 633.1 632.8 1October 2022 2019 LFL £m £m % NAV per share 1.02 0.64 LFL retail sales 13 7.9 133.8 3 NCF Non-LFL retail sales 16.7 10.6 2022 2021 Statutory reference £m £m Retail sales 154.6 14 4.4 Decrease in cash and cash equivalents Cash flow statement (4.5) (8.5) 10 weeks to 10 weeks to (Decrease)/increase in other cash deposits Cash flow statement (0.2) 1.2 1October 2022 2October 2021 LFL Disposals Note 30 – 0.1 £m £m % Cash outflow from movement in debt Note 30 30.9 125.3 LFL retail sales 13 7.9 132.3 4 Non-LFL retail sales 16.7 13.1 Net cash flow 26.2 118.1 Retail sales 154.6 145.4 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 169 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION ### ALTERNATIVE PERFORMANCE MEASURES CONTINUED | Net debt | | | | | Underlying operating margin | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Statutory | 2022 | 2021 | | | Statutory | 2022 | 2021 | | | | reference | £m | £m | | | reference | £m | £m | | | Cash flow | | | | | | Income | | | | Decrease in cash and cash equivalents in the period | statement (4.5) (8.5) | | | | Operating profit/(loss) from continuing operations | statement 145.4 (105.0) | | | | | | Cash flow | | | | | | Income | | | | (Decrease)/increase in other cash deposits | statement (0.2) 1.2 | | | | (Income)/loss from associates | statement (3.3) 14.5 | | | | Disposals Note 30 – 0.1 Non-underlying operating items Note 4 (26.7) 96.2 Cash outflow from movement in debt excluding lease Underlying operating profit excluding income/(loss) Income liabilities 22.4 105.5 from associates (‘pub operating profit’) statement 115. 4 5.7 Net cash inflow 17.7 98.3 Total revenue Note 3 799.6 401.7 Disposals and classified as held for sale Note 30 – (0.1) Underlying operating margin 14.4% 1.4% Non-cash movements and deferred issue costs (1.6) (1.6) | Movement in net debt excluding lease liabilities in | 26 weeks to | | | 26 weeks to | | | 52 weeks to | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | theperiod 16.1 96.6 | 2April 2022 | | 1October 2022 | | | 1October 2022 | | | | | | £m | | | £m | | | £m | Net debt excluding lease liabilities at beginning of theperiod Note 30 (1,232.3) (1,328.9) Operating profit 43.9 101.5 145.4 Net debt excluding lease liabilities at end of the period Note 30 (1,216.2) (1,232.3) Loss/(income) from associates 2.0 (5.3) 3.3 Non-underlying operating items 6.0 20.7 (26.7) Underlying EBITDA Statutory 2022 2021 Underlying operating profit excluding income/(loss) reference £m £m from associates (‘pub operating profit’) 39.9 75.5 115.4 Total revenue 369.7 42 9.9 799.6 Operating profit/(loss) Income statement 145.4 (105.0) Underlying operating margin 10.8% 17. 6% 14.4% Non-underlying operating items* Note 4, 8 (26.7) 97.6 Depreciation and amortisation Cash flow statement 44.2 42.7 Underlying EBITDA including income/(loss) from associates 162.9 35.3 (Income)/loss from associates Income statement (3.3) 14.5 Underlying EBITDA excluding income/(loss) from associates 159.6 49.8 * 2021 underlying EBITDA comparatives include the results of discontinued operations. 170 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # INFORMATION FOR SHAREHOLDERS # Annual General Meeting (AGM) The Company's AGM will be held at 10.00am on 24 January 2023 at The Farmhouse at Mackworth, 60 Ashbourne Road, Derby DE22 4LY. Any changes to the AGM arrangements will be communicated to shareholders before the AGM through our website and, where appropriate, by RNS announcement. # Online voting for the Annual General Meeting Shareholder participation remains important to us and we strongly encourage all shareholders to participate in the business of the meeting by submitting your votes on each of the resolutions in advance. To register the appointment of a proxy electronically, visit www.sharevive.co.uk and follow the instructions provided (you will need the voting numbers found on your Form of Proxy). Alternatively, shareholders who have already registered with Equiniti Registrars' online portfolio service, Shareview, can appoint their proxy electronically by logging on to their portfolio at www.shareview.co.uk using their user ID and password. Once logged in, click 'view' on the 'My Investments' page. Click on the link to vote and follow the on-screen instructions. # Financial calendar | AGM and Interim Management Statement | 24 January 2023 | | --- | --- | | Half-year results | May 2023 | | Full-year results | December 2023 | These dates are indicative only and may be subject to change. # The Marston's website Shareholders are encouraged to visit our website www.marstonpubs.co.uk for further information about the Company. The dedicated investors section on the website contains information specifically for shareholders, including share price information, historical dividend amounts and payment dates together with this year's (and prior years') Annual Report and Accounts. # Registrars The Company's shareholder register is maintained by our Registrar, Equiniti. If you have any queries relating to your Marston's PLC shareholding you should contact Equiniti directly by one of the methods below: | **Online:** | help.shareview.co.uk - from here you will be able to securely email Equiniti with your query | | --- | --- | | **Telephone:** | 0371 384 2274* | | **By post:** | Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA | * Lines are open from 9.00am to 5.00pm (UK time). Monday to Friday, excluding public holidays in England and Wales. MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 # Dividend payments The Board confirms that given the disruption to trading and the road to recovery from COVID-19 in the current financial year, and the current uncertainty, there is no intention to pay dividends in respect of financial year 2022. The Board is cognisant of the importance of dividends to shareholders and intends to keep potential future dividends under review. However, if you believe you have any unclaimed dividends or have misplaced a cheque, please contact Equiniti or visit www.shareview.co.uk. By completing a bank mandate form, dividends can be paid directly into your bank or building society account. Those selecting the payment method will benefit from receiving cleared funds in their bank account on the payment date, avoiding postal delays and removing the risk of any cheques being lost in the post. To change how you receive your dividends contact Equiniti or visit www.shareview.co.uk. # Duplicate documents If you have received two or more sets of the documents concerning the AGM this means that there is more than one account in your name on the shareholder register, perhaps because either your name or your address appear on each account in a slightly different way. If you think this might be the case and would like to combine your accounts, please contact Equiniti. # Moving house? It is important that you notify Equiniti of your new address as soon as possible. If you reside in the UK, this can be done quickly over the telephone or in writing, quoting your full name, shareholder reference number (if known), previous address and new address. # Electronic communications Changes in legislation in recent years allow the Company to use its corporate website as the main way to communicate with shareholders. Annual Report and Accounts are only sent to those shareholders who have opted to receive a paper copy. Registering to receive shareholder documentation from the Company electronically will allow shareholders to: - view the Annual Report and Accounts on the day it is published; - receive an email alert when the Annual Report and Accounts and any other shareholder documents are available; - cast their AGM votes electronically; and - manage their shareholding quickly and securely online, through www.shareview.co.uk This reduces our impact on the environment, minimises waste and reduces printing and mailing costs. For further information and to register for electronic shareholder communications, visit www.shareview.co.uk STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # INFORMATION FOR SHAREHOLDERS CONTINUED # Buying and selling shares in the UK If you wish to buy or sell Marston's PLC shares and hold a share certificate, you can: - use the services of a stockbroker or high street bank; or - use a telephone or online service. If you sell your shares in this way you will need to present your share certificate at the time of sale. Details of a low cost dealing service may be obtained from www.shareview.co.uk or 0245 603 7037**. ** Lines are open Monday to Friday, 8.00am to 4.30pm for dealing and until 6.00pm for enquiries (UK time), excluding English public holidays. # Ordinary shares Range of shareholding | Balance Ranges | Total number of holdings | Percentage of holders | Total number of shares | Percentage issued capital | | --- | --- | --- | --- | --- | | 1-1,000 | 3,414 | 45.44% | 1,356,489 | 0.21% | | 1,001-10,000 | 3,067 | 40.82% | 11,411,022 | 1.73% | | 10,001-100,000 | 785 | 10.45% | 21,262,175 | 3.22% | | 100,001-1,000,000 | 162 | 2.16% | 59,886,600 | 9.07% | | 1,000,001-999,999,999 | 85 | 1.13% | 566,445,908 | 85.78% | | Totals | 7,513 | 100.00% | 660,362,194 | 100.00% | Analysis of shareholder register by investor type ![img-9.jpeg](img-9.jpeg) Private client fund managers - 30.07% Private investors - 7.32% Institutional investors - 42.61% # Share fraud warning Share fraud includes scams where investors are called out of the blue and offered an inflated price for shares they own or shares that often turn out to be worthless or non-existent. These calls come from fraudsters operating 'boiler rooms' that are mostly based abroad. While high profits are promised, those who buy or sell shares in this way usually lose their money. The Financial Conduct Authority (FCA) has found most share fraud victims are experienced investors who lose an average of £20,000, with around £200 million lost in the UK each year. If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company or research reports, you should take these steps before handing over any money: - Get the name of the person and organisation contacting you. - Check the Financial Services Register at www.fca.org.uk/register to ensure they are authorised. - Use the details on the FCA Register to contact the firm. - Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact details on the Register or you are told they are out of date. - Search the FCA list of unauthorised firms and individuals to avoid doing business with. - Remember, if it sounds too good to be true, it probably is. If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong. If you are approached about a share scam you should tell the FCA using the share fraud reporting form at www.fca.org.uk where you will find out about the latest investment scams. You can also call the Consumer Helpline on 0800 111 6768. # Company details Registered office: Marston's House, Brewery Road, Wolverhampton WV1 4JT We will be moving to our new office in early 2023, when our registered office will change to: St Johns House, St Johns Square, Wolverhampton WV2 4BH Telephone: 01902 907250 Company registration number: 31461 Investor queries: investorrelations@marstons.co.uk # Auditor KPMG LLP, One Snowhill, Snowhill Queensway, Birmingham B4 6GH # Advisers JP Morgan Cazenove, 20 Maorgate, London EC2R 6DA Peel Hunt LLP, Moor House, 120 London Wall, London EC2Y 5ET # Solicitors Freshfield Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y 1HS Slaughter & May LLP, One Burnhill Row, London EC1Y 8YY 172 MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2023 STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION # HISTORICAL KPIS We've made changes to our KPIs during the reporting year. The following KPIs will not be reported on from the 2022/23 FY. # Sales growth vs Peach market tracker % During the year, we reviewed the operation of the Peach market tracker, which provides sales data for the UK eating and drinking out market. Following that review, the Peach market tracker was replaced as a KPI with the league table of pub companies, provided by Reputation. ![img-10.jpeg](img-10.jpeg) # Great place to work Early in the reporting year, we agreed to focus on the engagement and enablement of our people and replaced the Glassdoor rating with our Peakon engagement score. 2022 FY 2021 FY # GLOSSARY CMBC Carlsberg Marston's Brewing Company Critical role turnover The number of times the person in a critical role changes EBIT Earnings before interest and tax EHO Food hygiene rating issued by Food Standards Agency EPS Earnings per share ESG Environmental, Social and Governance EV Electric vehicle FRC Financial Reporting Council – independent regulator FTSE4Good An index designed to measure the performance of companies demonstrating strong Environmental, Social and Governance practices FY Financial year H1 The first half of the financial year H2 The second half of the financial year MRO Market rent only – as defined in The Pubs Code Mwhr Megawatt – a measure of electric power NLW National Living Wage NMW National Minimum Wage OHID Office for Health Improvement and Disparities PBT Profit before tax PCA Pubs Code Adjudicator PCDR Performance, Career and Development Review Rapid electrical vehicle charges Fast charging network for electric vehicles REGO Renewable Energy Guarantees of Origin ROCE Return on capital employed – a measure of how effectively we use the capital invested in our business SEDEX Supplier Ethical Data Exchange – membership organisation for auditing supply chains TCFD Task Force on Climate-related Financial Disclosures The Pubs Code Statutory regulation effective 21 July 2016 TSR Total shareholder return – a combination of share price appreciation and dividends paid Total revenue Total revenue from continuing operations WRAP Waste & Resources Action Programme MARSTON'S PLC ANNUAL REPORT AND ACCOUNTS 2022 MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022 Marston’s PLC Marston’s House, Brewery Road, Wolverhampton WV1 4JT Telephone 01902 907250 Registered No. 31461