Business Staff Regional brewing giant Marston's reported a dip in annual profits after being hit by interest rate rises and the costs of the summer's flooding.
But the pub company – formerly Wolverhampton & Dudley Breweries – said "robust" sales were now driving resurgent profits. The Pedigree brewer saw pre-tax annual profits dip three per cent to £98 million in the year to the end of September, down from £101.5 million, after forking out £2 million in repair bills from the summer floods.
But it said like-for-like sales were up 4.6 per cent in the year, despite the "challenging background" of severe flooding and the introduction of the English smoking ban. And the firm said its preparations for the smoking ban helped current trading beat last year's in its Marston’s Inns & Taverns chains, with like-for-like sales rising 2.1 per cent over the past two months and food sales up 9.1 per cent.
The firm focused on casual dining and investment in external areas to help it offset any potential impact from the smoking ban. But it said the full impacts of the ban were yet to be seen as colder winter weather started to set in, making outdoor areas unappealing.
The firm’s full year profits were just shy of the £100 million previously expected by analysts, before Marston’s warned last month that the flood damage would knock results.
The group has a strong presence in Midland and Yorkshire areas which were particularly affected by the June and July floods.
It also faced pressure from rising interest rates after a one per cent rise in the cost of its £500 million banking facilities.
Marston's chief executive Ralph Findlay said: "Given the challenging trading environment, these are a strong set of figures.
"We remain cautious about consumer confidence, regulatory cost pressures and the short-term impact of the smoking ban, but we are well positioned to exploit current trends, including the continuing growth in casual dining."
Marston’s brewing operation, which makes famous lines like Pedigree and Banks's Bitter, saw a drop in both sales and earnings, with turnover down two per cent at £84.1 million and underlying operating profit off by three per cent at £17.4 million.
The group blamed the brewing profit fall on the loss of one of its major clients, Pyramid Inns, which was bought by rival Admiral Taverns last year.
Beer sales also fell as it shifted focus away from third party wholesalers to protect margins, it added.
But sales were given a lift by its £155.1 million acquisition of pubs chain Eldridge Pope in January, as well as its cricket sponsorship, becoming the "Official Beer of England" and sponsoring Sky’s cricket coverage.
The group, whose freehold estate is valued at about £2 billion, said it had considered conversion to Real Estate Investment Trust (REIT) status, but had ruled it out as the cost of implementing the scheme would have been "extremely high".
"There is no compelling case for us to fold our pubs into a REIT-style vehicle," said Mr Findlay.
"Owning the freehold of our pubs is much more attractive for us. It gives us more flexibility to maximise the value from our estate. But if someone came up with a REIT plan that could add value for shareholders... then we would look at it."