Marston’s PLC (LON:MARS) shares sank on Thursday as the publican unveiled plans to cut around 2,150 pub-based jobs currently on furlough as a result of recent trading restrictions caused by the coronavirus pandemic.
The job cuts were revealed in a trading update for the year ended October 3, in which the group reported that sales in the year were GBP821mln, 30% below last year, as the company was hit hard by pub closures during the UK’s lockdown period.
While the company highlighted that it had outperformed the UK pub sector in the 13 weeks since reopening its pubs on July 4, with managed and franchised like-for-like sales averaging 90% of last years figure and ahead of its forecasts, it said the new three tier system of restrictions introduced by the government earlier this week has undermined consumer confidence and created uncertainty.
Marston’s said the measures were “hugely disappointing in view of a lack of clear evidence tying pubs to the recent increase in infection levels”, adding that in addition to the planned job cuts it has now initiated a full review of its overhead costs to be concluded by the end of December.
The planned job cuts follow similar actions from fellow pub group Mitchells & Butlers PLC (LON:MAB) on Tuesday when the company said it has started consultations to cut staff but it has not yet disclosed how many jobs will go.
Meanwhile, the company said that a joint venture between its brewing operation and Carlsberg has been cleared by the Competition and Markets Authority (CMA) and the transaction is expected to complete at the end of October.
The company said the initial net proceeds from the sale of Marston’s Beer Company into the joint venture will be around GBP230mln, which it said will be used to further reduce its level of bank debt.
“The additional restrictions which have been applied across the UK most recently present significant challenges to us and will make business more difficult for a period of time. I very much regret that the consequence of this is that the jobs of around 2,150 of our colleagues will be impacted, but it is an inevitable consequence of the limitations placed upon our business”, Marston’s chief executive Ralph Findlay said in a statement.
“There is much uncertainty ahead, the majority of which is outside of our control, however, we will continue to focus on the safety of our teams and guests. Looking beyond the immediate challenges, we look forward to our future as a focused pub operator, returning to growth when trading conditions allow and realising the opportunities which are open to us over the medium to longer term”, he added.
In a note, analysts at house broker Peel Hunt retained their ‘buy’ rating and 95p target price, saying the even under the current restrictions Marston’s is “trading profitably and paying down debt”.
“Thus, we believe [Marston’s] offers limited downside risk, and big upside risk on any news on defeating [coronavirus]”, the broker said, adding that they expected the firm’s net debt to fall to GBP1.1bn from GBP1.4bn in two years despite “no equity raise, minimal disposal activity and all pubs being closed for all of “the third quarter”.
Investors were less upbeat as the shares fell 7% to 41.7p in mid-morning trading.