Pubs to be proud of

MARSTON’S PLC

ANNUAL REPORT AND ACCOUNTS 2022

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Pubs to be proud of

Marston’s is a leading pub operator;

our pubs are at the heart of the

communities they serve.

STRATEGIC REPORT

Our purpose 1

At a glance 2

Chair’s statement 3

CEO’s statement 4

Market dynamics 6

Our business model 7

Our strategy 8

Group operational and financial review 17

Section 172(1) statement 20

Stakeholder engagement 21

Responsible business 24

Non-financial information statement 41

Risk and risk management 43

GOVERNANCE

Chair’s introduction 56

Board of Directors 58

Corporate Governance report 60

Directors’ Remuneration report 72

FINANCIAL STATEMENTS

Independent Auditor’s report to the

members of Marston’s PLC 99

Group income statement 108

Group statement of

comprehensiveincome 110

Group cash flow statement 111

Group balance sheet 112

Group statement of changes in equity 114

Notes to the Group accounts 116

Company balance sheet 155

Company statement of

changes in equity 156

Notes to the Company accounts 157

ADDITIONAL INFORMATION

Alternative performance measures 167

Information for shareholders 171

Glossary 173

The Strategic Report, outlined from the inside front cover to page 55 incorporates: Our purpose, At a glance, Chair’s

statement, CEO’s, Market dynamics, Our business model, Our strategy, Our key performance indicators, Strategy in

action, Group operational and financial review, Section 172(1) statement, Stakeholder engagement, Responsible

business, Non-financial information statement and Risk and risk management.

By order of the Board

ANDREW ANDREA

CHIEF EXECUTIVE OFFICER

Revenue

£799.6m

2021: £401.7m*

Net cash inflow

£26.2m

2021: £118 .1m

Underlying Earnings/(loss) per share

4.3p

2021: (13.6)p

Earnings/(loss) per share

21.7p

2021: (20.3)p*

Underlying Profit/(loss) before tax

£27.7m

2021: £(101.3)m

Profit/(loss) before tax

£163.4m

2021: £(171.1)m*

FINANCIAL HIGHLIGHTS

WE HAVE PUBLISHED

OURFIRST TCFD REPORT

* From continuing operations.

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Our purpose is to bring

people together to create

happy, memorable,

meaningful experiences.

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

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

objectives are core to how we achieve our purpose:

WE ARE GUEST

OBSESSED

We always put our guests first,

aiming to delight them every

time they’re in our pubs.

WE RAISE

THE BAR

We’re committed to each

other, the business and being

the best version ofourselves.

WE WILL

GROW

We challenge ourselves,

and each other, to ensure

we’re always improving and

moving forward.

Pubs to be proud of

READ MORE ON PAGE 11 READ MORE ON PAGE 14 READ MORE ON PAGE 16

OUR PURPOSE

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

AT A GLANCE

A focused pub operator

Marston’s has around 12,000 employees

and a diverse estate of over 1,400

pubsand bars which allows us to offer

something for every guest, as well as

contributing to each of the communities

where we operate. We are a focused

puboperator, with a culture that places

guests at the heart of everything we do.

Our vision is ‘Pubs to be proud of’.

Thisembodies our DNA of being a

focusedpub operator, whilst consistently

delivering high levelsof guest satisfaction

and standards through our great pub teams.

We are guest obsessed:

• This year we have simplified our pub

estate. Our menus have been streamlined

too and some of our pubs have been

repositioned to one of our three formats.

• We have invested in our guest journey and

insight, with improved systems and

processes, supporting guest-led decisions.

We raise the bar:

• Continuous improvement has been

delivered by investing in our people,

improving our reward and recognition

programmes and investing in employee

engagement; one of our critical

successfactors.

We will grow:

• To deliver our £1 billion sales target, we

areinvesting in key areas of our estate,

evolving our franchise-style model through

innovative offers and creating a ‘Never

full, fancy another’ sales culture.

‘Doing more to be proud of’

• Our ESG initiative is linked to our corporate

vision. Targets have been set for Net Zero

and food waste and our social purpose

agenda has been a focus for us this year.

Pubs and bars

1,468

No. of Signature pubs

101

South of England

Wales

Scotland

North of England

Midlands

No. of Community pubs

1,057

No. of Revere pubs

Electric vehicle

chargers

123

No. of Tenanted

&Leased pubs

266

15 1

C R S

263 15

C R S

T&L

457 6

125

C R S

T&L

157 1

T&L

165 21

2620

C R S

T&L

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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.

Our vision strategy and goals

Following the sale of the brewing business in

October 2020, Marston’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

at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 Net

Zero by 2030 for Scope 1 and 2 emissions and

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.

WILLIAM RUCKER

CHAIR

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CEO’S STATEMENT

Delivering on our purpose

2022 has been a year of two halves.

Thefirst half year results were impacted

bytrading restrictions and consumer

confidence as a consequence of the

disruption caused by the Omicron variant,

affecting December 2021 and the critical

Christmas trading period through to the

end of January 2022. During the second

half, we were encouraged that we traded

well and consumer demand for our pubs

remained robust as more normalised

trading conditions resumed.

With the impact of COVID-19 restrictions

hopefully behind us and despite the

well-documented cost inflation, which all

businesses are facing currently, the Group will

benefit from an estate that is balanced

across formats and locations, with well-

invested pubs, and is set for future sustainable

like-for-like growth and shareholder value

creation over the medium to long term.

In 2021 we launched our new vision ‘Pubs to

be proud of’ with a purpose ‘to bring people

together, to create happy, memorable,

meaningful experiences’, which embodies

our cultural DNA of being a pub operator at

our core, whilst focusing on consistently

delivering high levels of guest satisfaction

and standards through our great pub teams.

The performance supports the progress we

are making against our strategy and the

transformation which has been implemented

across the business in FY2022. Our primary

corporate goals remain: reaching two

£1billion financial targets over time, namely

the achievement of sales of £1 billion and

reducing the Group’s debt, excluding

IFRS16lease liabilities, to below £1 billion.

Wecontinue to make progress on both of

these goals.

Trading

Revenue increased by 99% to £799.6 million

(2021: £401.7 million from continuing

operations), principally reflecting recovery

from a period severely impacted by COVID-19

and the significant restrictions to pub trading

during the prioryear.

As expected, given the significant impact

ofthe Omicron variant during H1 and the

important 2021 festive season, like-for-like retail

sales for the year as a whole were 1% below

2019 levels, the last pre-pandemic trading

year. However, like-for-like retail sales for the

10weeks to 1 October 2022 were 3% up

compared to 2019 and 4% up compared to

2021, showing encouraging recovery and the

positive impact of our strategy.

Drink sales have outperformed food sales,

once again demonstrating the trading

resilience of our predominantly community

pub estate. We continue to have confidence

that our pub strategy is beginning to deliver

positive momentum, evidenced by the trading

performance. Our strategy is centered upon

delivering affordable pub experiences for our

guests in a quality environment both inside

and out in our well invested pub gardens and

outdoor trading areas.

Underlying operating profit excluding

income from associates was £115.4 million

(2021: £5.7 million) with a margin of 14.4%

(2021: 1.4%); H1 margin was 10.8% and H2

margin was 17.6%. Underlying operating

profit, including income from associates,

was£118.7 million (2021: loss of £(8.8) million).

Property and net assets

The Group has moved to annual external

valuations of its properties and all pubs

willbeinspected on a rotational basis. Each

year, valuation will be based on a physical

inspection of approximately one third of the

estate with the remainder subject to a

desktop valuation.

The carrying value of the estate is now

£2.1billion (2021: £2.0 billion); as a result of the

valuation and leasehold impairment review

there is an effective freehold impairment

reversal of £88.4 million and a leasehold

impairment reversal of £5.0 million, giving

a£93.4 million increase in net book value.

During the period, net asset value increased

by £241.7 million to £648.1 million. This is

primarily due to the increase in the value ofour

estate and reduction in liabilities from interest

rate swaps. As a result of this, net assetvalue

per share has increased to £1.02(2021: £0.64).

Debt and financing

The vast majority of our borrowing is

long-dated and asset-backed. 90% of our

borrowings are hedged and therefore not at

risk of any changes in interest rate movements

that may occur during the year. Further detail

is set out in the Group Operational and

Financial Review on page 17.

Net debt, excluding IFRS 16 lease liabilities,

was £1,216 million, a reduction of £16 million

from last year (2021: £1,232 million). Total net

debt of £1,594 million (2021: £1,604 million)

includes IFRS 16 lease liabilities of £378 million

(2021: £372 million).

ANDREW ANDREA

CHIEF EXECUTIVE OFFICER

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CEO’S STATEMENT CONTINUED

Delivering on our purpose

Carlsberg Marston’s Brewing

Company (CMBC)

The pandemic and the macroeconomic

environment have had an impact on CMBC’s

trading results in financial year 2022. The

income from CMBC of £3.3 million (2021: loss

of £(14.5) million) reflects the Group’s share of

the statutory profit after tax generated by

CMBC. Whilst CMBC’s results show a recovery

from last year, they also reflect the impact of

the Omicron variant during the year; H1 saw

a loss of £(2.0) million.

Dividends from associates of £19.4 million

were received (2021: £nil), primarily resulting

from one-off working capital movements.

Weremain confident we will receive regular

future dividends from CMBC when there is

areturn to a more normalised market.

ESG – ‘Doing more to be proud of’

We remain committed to driving our ESG

agenda under ‘Doing more to be proud of’,

with a target to achieve Net Zero by 2030

forScope 1 and 2 emissions and by 2040 for

Scope 3, and reduction in our food waste

by50% by 2030. We are also focusing on

oursocial impact, including exploring

apartnership with the Trussell Trust and

providing employment opportunities for

vulnerable groups under our Latitude

programme. Our commitment to standards

and good governance remains with EHO

scores of 5* being a KPI.

This year, we have also published our first

TCFD report, detailing the impact of climate

change on our business. More information on

our initiatives and TCFD report will be

available on our website.

Current trading and outlook

Trading since the year end remains

encouraging. Like-for-like sales in our

managed and franchised pubs are up 6.8% vs

the same period last year. October earnings

were in line with our expectations. Bookings for

Christmas Day and Christmas Fayre are

encouraging and are building in momentum.

Total bookings for the Christmas period are

higher than in 2019 and in line with our plans,

albeit walk-in trade typically accounts for a

significant proportion of overall sales over the

Christmas trading period.

For the first two England World Cup games,

like-for-like drink sales on those days were

c.+50% compared to 2021.

We remain cognisant of the current

macroeconomic environment with the

cost-of-living crisis, the impact of the conflict

in Ukraine and the resulting challenges this

brings in respect of cost inflation and the

potential impact on disposable income, as

well as potential supply issues. However, pubs

have demonstrated their resilience time and

time again and, to date, there is little in our

trading performance to suggest that there

has been a change to consumer behaviour;

our guests still want to go out and have an

affordable treat in a Marston’s pub.

Similar to others in the hospitality business, our

major cost lines within the business are food,

drink, labour and energy. We continue with a

relentless focus on managing costs to mitigate

the inflationary impact on the business. We

are working hard to mitigate as many of these

cost pressures as possible and we expect to

offset some of these higher levels of inflation

through a combination of cost efficiencies

and pricing strategies.

Food and drink: c.60% of food is contracted

until FY2023 or beyond. For drinks, 74% of the

cost is contracted beyond FY2023 and the

annual price increases for these contracts

are in line with our previous guidance.

Labour: following the Autumn Statement

andthe higher than initially anticipated

increases to NLW/NMW, effective April 2023,

we estimate the impact to be an additional

c.£2million of higher costs in FY2023. As part

of our pricing review, we will seek to mitigate

the majority of this cost.

Energy: the Group’s gas price is fixed until

theend of March 2025 with no additional

incremental spend anticipated. The Group’s

electricity is hedged for H1 of FY2023, covering

the six-month period from October 2022 to

March 2023. The Government’s six-month

energy price cap for businesses is helpful

andfurther protects our H1 energy spend.

Regarding H2, we await the review of the

price cap, expected by 31 December 2022,

albeit at this stage the guidance we have

provided on energy costs for the Group’s

financial year as a whole remains the same.

Inkeeping with our commitment to our ESG

strategy, we continue to focus on making

efforts to mitigate energy costs wherever

possible, such as adopting further energy

efficient or saving schemes.

Looking ahead, whilst the short-term outlook is

of course uncertain, we remain confident in

the future prospects of the Group. What is

clear is that people want – and are continuing

– to visit our predominantly community pubs.

Our customer insight and experience

concludes that people still want – and are

keen – to socialise, with the pub historically

being the place to fulfil that ‘affordable

socialising’ occasion, prioritising experience

and leisure expenditure over bigger ticket

spend. The level of guest demand we are

experiencing is encouraging and underpins

our confidence that we have the right

strategy in place and that it is delivering

positive progress on our clearly stated

strategic goals. Over and above this, the

World Cup and the first Christmas period

without restrictions in three years present

excellent trading opportunities for

Marston’spubs.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

MARKET DYNAMICS

Insight and trends

Despite the challenging macroeconomic

environment, our focus has been to ensure

we deliver great pub experiences to our

guests, at an affordable price in a

well-invested estate. History demonstrates

that pubs are resilient and are viewed as

an affordable treat.

There are five key dynamics of the

changing market which we believe we

are well equipped to benefit from:

Our guests still want to socialise outside

the home

The desire to socialise remains strong.

Arecent CGA survey highlighted that

going out to socialise was the number

one item of spend to protect in the

current environment.

‘Brand Pub’ is in strong demand

The strategy we set out a year ago

focused on creating ‘Pubs to be proud

of’ ensuring all of our pubs welcomed

drinkers and diners equally. Our

strategy remains unchanged. This

winter, our campaign will be aimed at

welcoming our guests into Marston’s

warm and cosy pubs as the place to

socialise at an affordable price, and

enjoy the first winter World Cup.

Lifestyle changes favour community

pubs versus town centres

Emerging from the pandemic the shift

to hybrid working has embedded itself,

with office workers typically working

1–2days a week at home. In addition,

in the current climate, for pubs that

offer the right experience, guests will

consider staying within their local

community rather than spending

money to travel to a city or town

centre. Over 90% of our pubs are in

suburban areas and are well placed

toexploit this trend. We are focused on

providing a ‘town centre’ experience

inour suburban pubs, ranging from an

improved menu and a guest-led drinks

range to ensuring we provide the right

entertainment or occasion-led

experiences for the local community.

Experience replacing convenience

asreason to visit

As referred to above, there is strong

demand to socialise outside the home,

but the focus and expectation of our

guests is driven by experience and

quality, rather than convenience or

price. We seek to be regarded as the

‘best pub around here’ offering a great

value, affordable treat but not at the

lowest price.

‘Al fresco’ drinking and eating is

heretostay

The demand to eat and drink outside

has been increasing for many years, a

trend further bolstered post-pandemic.

To maximise our opportunity we have

invested in outside space with c.85% of

our pubs having gardens and c.50 pubs

having outdoor screens to show sport,

enhancing trading performance

throughout the seasons.

Order and pay at table systems are

keyto driving garden sales and we

invested in technology during the

yearto improve both the guest and

operational journey. Encouraged by

the2022 performance, we believe

ouroutdoor spaces can be enhanced

further by investing £4 million across

theestate in 2023 on garden

projectstodeliver an even

betterguestexperience.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

OUR BUSINESS MODEL

A people-powered business

OUR RELATIONSHIPS

Our business model relies on the strength of

ourrelationships with our key stakeholders to

generate and maximise value in a responsible

and financially prudent manner for the

long-term success of the Company.

The best people

Great pub teams, support teams and leaders all

focused on delivering great guest experiences.

Happy guests

Delighting our guests on every occasion, so they visit

our pubs time and time again.

Committed Pub Partners

Working with entrepreneurs who believe in our

purpose and strive to achieve our shared vision.

Trusted suppliers

Long-term, mutually beneficial partnerships with our

suppliers, delivering success for all.

Supportive Government

Engaging with, and working with, Government and

other regulatory bodies ensures the best outcomes

for our guests and our business.

Engaged communities

We play an active role in our communities,

generating a positive impact at a local level.

A responsible business

We’re committed to being a responsible and

sustainable business and doing the right thing:

Doing more to be proud of.

WHAT WE DO

Responding to changing market dynamics, we’ve simplified our estate by categorising

our pubs into three core formats and conversion of the estate to one of these categories

is ongoing. Our investment programme ensures that our pubs are maintained to the

highest of standards.

THE VALUE WE CREATE

HOW WE DO IT

Our one team approach, focused on our clearly defined pub and corporate goals,

working better and smarter, to deliver our vision of ‘Pubs to be proud of’.

WE ARE GUEST

OBSESSED

We always put our guests

first, aiming to delight

them every time they’re

inour pubs.

READ MORE ON PAGE 16

FINANCIAL

OUTPUTS

Grow earnings

Progressive and sustainable dividend

Reduced debt

Debt: equity transfer

Increased returns

Increased NAV

FINANCIAL STRATEGY DRIVING SHAREHOLDER VALUE

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

2022

2021

2020

83.6%

77. 4%

70.3%

2022

2021

55.5m

2020

(61.0)m

67.0m

2022

20212021

2020

7.0%

12.3%

9.9%

2022

2021

2020

3.9

3.0

3.3

2022

2021

2020

799.6m

401.7m

515.5m

2022

2021

2020

1,216m

1,232m

1,377m

2022

731

2022

2021

7.8

7.9

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

OUR STRATEGY CONTINUED

Focused vision, sustainable business, clear goals

Our KPIs represent our principal metrics that we focus on in running our guest obsessed business. They measure our progress

inraising the bar on our performance and in growing the business. They also help to determine how we are remunerated.

We are guest

obsessed

Linked to remuneration

 These goals relate to our managed and retail pubs.

We raise

the bar

We will

grow

Key:

CORE PUB GOALS



CORE CORPORATE GOALS

Loved by guests

All of our pubs to have a Reputation score of 800 or more

Great place towork

Peakon engagement score of 8 or more

Trusted

All of our pubs to be 5* EHO

Better than the rest

To be the no.1 pub company on Reputation.com

‘Never full, fancy another’ sales culture

Spend per head vs LY %

Responsible business

To remain in the FTSE4Good index

‘Back to a billion’

Total revenue – £m

Prioritising the health and safety of our guests and

ourpeople.

Why it’s important

Ensuring all of our pubs meet these standards is an

integral part of our commitment to deliver our vision of

‘Pubs to be proud of’.

To consistently outperform our competitors from

aguest’s perspective.

Why it’s important

We can see how we compare to our competitors in

the eyes of the guest.

To instil an entrepreneurial mindset and sales culture

within our business, maximising the spend per guest visit.

Why it’s important

A great pub is never full (we can always fit you in) and

great pub teams always ask our guests if they would

like something else.

To achieve our corporate goals: £1 billion sales and net

debt (excluding lease liabilities) below £1 billion.

Why it’s important

Reaching our financial goals will stimulate growth and

value for all stakeholders.

Demonstrating that we are a responsible and

sustainablebusiness.

Why it’s important

Creating a sustainable future for our business benefits all

of our stakeholders.

To be the ‘best pub around here’ and for our guests

tosupport us

Why it’s important

Delivering great guest experiences every time ensures

our guests will visit our pubs time and timeagain.

To be a great place to work; engaging with, listening to

and enabling our people.

Why it’s important

As a ‘people-powered’ business, we want to attract and

retain the best people.

LINK TO STRATEGY

Note:

We’ve made changes to some of our KPIs during the

reporting year. Further details are set out on page 173.

LINK TO STRATEGY

LINKED TO REMUNERATION

LINK TO STRATEGY

LINKED TO REMUNERATION

LINK TO STRATEGY

LINKED TO REMUNERATION

Net debt (excluding lease liabilities) – £m

Free cash flow (FCF) – £m

3rd

We’ve moved from 4th to 3rd place

during the 2021/22 reporting year.

We are targeting 1st place.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

STRATEGY IN ACTION

2022 – A transformational year

In 2021 we launched our new vision

‘Pubsto be proud of’ with a purpose ‘to

bring people together, to create happy,

memorable, meaningful experiences’,

which embodies our cultural DNA of

being a pub operator at our core, whilst

focusing on consistently delivering high

levels of guest satisfaction and standards

through our great pub teams.

Underpinning this vision are clear operational

targets, which are being monitored and

measured by external platforms, such as

Reputation.com, EHO scores and ‘Your Voice’,

our employee engagement survey powered

by Peakon, together with the evolution of a

stronger sales culture aimed atfurther

improving footfall into our pubs andspend per

guest visit. Importantly, the targets set at pub

level align with the incentivemeasures across

the entire business and workforce, including

the Board and Executive team, to provide

consistency of focus at all levels.

During the last year, a change management

programme has delivered a transformational

change across our business, Underpinning this

programme was a significant change in the

leadership structure within the organisation.

Operationally, we have again strengthened

the team, with around half of the operational

field teams joining us within the last year, with

an encouraging blend of industry experience

and those from a pure retail background,

bringing further diversity of thought.

The calibre of external applicants has been

very strong, demonstrating the attractiveness

of Marston’s as a great place to work.

‘BACK TO A BILLION’ – OURCORPORATEGOALS

Our primary corporate goals are defined by two £1 billion financial targets:

Achieving sales

of £1 billion

This requires around £200 million of sales growth

frompre-pandemic levels.

Reducing net debt excluding IFRS 16 lease liabilities

to below £1 billion

Thisis consistent with our previously

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

STRATEGY IN ACTION CONTINUED

WE ARE GUEST

OBSESSED

We always

put our guests

first, aiming to

delight them

every time

they’re in

our pubs

Evolution of our estate

During the year we have taken the

opportunity to reposition some elements

ofour portfolio that have become more

challenged over time.

Two for One – 74 pubs

We decided to accelerate the removal

ofTwo for One from the portfolio and this

wascompleted in September 2022. The

conversion, which was implemented at a low

capital cost, has proved successful, with a

5.1% improvement to spend per head and

a4% increase in guest satisfaction scores.

Rotisserie – 37 pubs

Our format analysis concluded that most

ofthe Rotisserie pubs should convert to the

Signature format. As such, and as part of the

menu rationalisation described below, we

have replaced the Rotisserie menu with the

Signature menu. As a consequence, we have

decommissioned our Rotisserie ovens, which

were inefficient operationally, economically

and environmentally. This was completed by

the middle of October and is expected to

deliver c.£1 million of cost and margin

benefiteach year.

In response to changing market dynamics,

we have categorised all our pubs into three

core trading formats to meet changing

consumer trends, thereby reducing our

exposure to a pure mainstream offer

synonymous with discounting and a focus

onprice over experience, and maximising

the trading opportunity in each pub.

Our immediate priority was our food-led

business, and we have a clear journey to

reposition the trading formats of the food-led

estate over the course of the next four years.

We have concluded the same exercise with

our c.900 managed and franchised wet-led

pubs. The review indicated that c.90 pubs

should be converted to the Signature format,

over the next four years, and we are planning

to convert our first Signature wet-led pubs

in2023.

Importantly, consistency remains key across

all formats. Conversion of every pub in our

estate to one of the following three formats is

ongoing and applies to both our food-led

and wet-led pubs and is independent of

operational model (managed or retail):

Community: these are good value, local

pubs at the heart of their community. We are

unlocking growth through zoning that clearly

defines the bar and dining areas of the pub.

We are achieving growth from increased

drinks volume.

Signature: in this format we elevate the

everyday for our guests placing an emphasis

on a warm, timeless country-pub atmosphere

with food and drink provenance at the fore.

We target a frequency of one to two visits per

month, in suburban towns and villages where

quality of food, a friendly welcome and

familiarity are key drivers.

Revere: this is our most aspirational offer.

Guests visiting these pubs have a higher level

of disposable income, eat out frequently and

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.

Relevant stakeholders

1. Guests

2. Communities

3. Suppliers

READ MORE ON PAGE 45

HIGHLIGHT OF 2022

Increase in Reputation score in the last

12months

122

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Guest driven category management

– menu and range rationalisation

Quality of food and drink is the single biggest

influencer of guest satisfaction and during

the period we have undertaken a full review

of both categories.

Consequently, we have streamlined the

Group’s menus across the estate, significantly

reducing the number of different menus and

aligning them to one of the three formats:

Community, Signature and Revere. We also

removed operational complexity and

unnecessary costs by reducing the size

ofthemenu by 35%–50%, whilst remaining

focused on ensuring our food proposition is

not compromised despite the challenging

cost headwinds and still maintaining guest

satisfaction; our guest and employee

satisfaction scores have improved.

This exercise has significantly simplified our

business and, whilst the primary drivers of the

strategy have been guest and operational

insight, as with the menu rationalisation, this

will drive business-wide efficiencies in our

business going forward.

An efficient supply chain and more focused

menu has also helped us to achieve our target

of reducing food waste; a key component of

‘Doing more to be proud of’, our ESGagenda.

Enhancing the guest journey

As a consequence of the pandemic,

consumer behaviour and expectations

towards booking and paying have materially

changed. We are seeing an increased level

of bookings, rather than impulse visits and,

increasingly, there is an expectation that

pubs have some form of order and pay at

table platform.

In response to these behavioural changes,

we have invested in our technology and

teams as follows:

Bookings:

We have implemented the Collins booking

system in 542 of our managed and

franchised pubs, focusing on pubs that serve

food, and have developed the system to

ensure a better booking experience for our

guests and better insight and oversight for

our operational and finance teams.

Order at table:

We have injected additional investment

intoOrderbee, our order and pay at table

platform. Full integration with our existing

systems now means processing is seamless

and we are able to use the platform more

effectively as a tool to drive additional spend

per head, as well as providing the guest

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.

STRATEGY IN ACTION CONTINUED

WE ARE GUEST

OBSESSED

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

STRATEGY IN ACTION CONTINUED

Insight and data driven decisions

At the start of the year, we launched a

newguest insight platform, Reputation.com,

which generates a Reputation score for

eachpub based on social media feedback,

regardless of operating model. This platform

has embedded in our business with very

strong engagement and support from our

pub teams. In turn this has dramatically

improved the way we engage with and listen

to our guests and, as a result, our aggregate

Reputation score has increased by over

100points since inception. We see an

opportunity to improve this score further and

we have set a target for pubs to achieve a

score of 800 (or more). Joining the ‘800-Club’

(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.

We have also partnered with a card

analyticsagency to help us improve our

understanding of guest behaviour and spend

habits at a local level, which is particularly

important in the current socioeconomic

climate and enables us to adapt our

marketing strategy and ensure it is

deployedinthe most effective manner.

Finally, following the internal promotion of a

new Director of Insight and the external hire

of a new Director of Digital, we have invested

in both our insight and digital teams to ensure

we have the right people and technology

tobe able to respond quickly and

appropriately to a constantly changing

market and dynamic.

WE ARE GUEST

OBSESSED

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

WE RAISE

THE BAR

We’re committed

to each other,

the business and

being the best

version of

ourselves

STRATEGY IN ACTION CONTINUED

Investing in people

We employ around 12,000 people directly in

our c.500 managed pubs and an estimated

10,000 indirectly in our c.1,000 franchise and

leased pubs. Our people are at the heart

ofcreating ‘Pubs to be proud of’ and

engaging and investing in our teams to help

them improve the performance is critical to

our success.

Reward

We have reviewed our approach to

rewardinlight of the inflationary backdrop

and headwinds we are currently facing.

Economically, we need to ensure we are

offering attractive rates of pay relative to

other sectors and, morally, we recognise that

we have a role to play in ensuring our teams

can financially navigate through the current

cost-of-living crisis, whilst remaining focused

upon delivering our key corporate goals.

Tothat end, in March 2022 we increased the

minimum hourly wage rates for our pub teams

ahead of the national minimum wage rates

for all age groups. The annual cost of this

measure is currently around £3.5 million but

we view this as a key investment in people

that will pay for itself through improved service

standards and lower churn rates. In addition

to the annual pay review, for our lower paid

salaried employees, we are making a one-off

cost-of-living supplement payment in January

2023. These supplements are banded to

ensure that those paid the least receive the

most. For example, all salaried team members

earning under £30k per annum will receive

the maximum payment of £750.

Resourcing

Following the appointment of a new Director

of Talent Acquisition and Employer Brand we

have introduced several innovative initiatives

to improve our recruitment strategy. Given

theprofile of our pub teams, app-based

recruitment platforms are becoming

increasingly important. Social media platforms

such as TikTok and Snapchat are also potential

recruitment platforms with the potential to

reach a wider pool of talent. We are working

closely with our agency partners to ensure we

are directing our digital and recruitment

efforts in a focused and efficient manner.

We have long maintained the importance

ofapprenticeships in our business. We

currently have 326 apprentices, which has

doubled since the last reporting period.

Theprogramme extends across the

organisation from pub team members

through to embedded MBA programmes

andthe launch of the Women in Leadership

apprenticeship programme during the year.

Through our ESG initiative, ‘Doing more to be

proud of’, we are also trialling the use of

apprenticeships as a way back to work for

marginalised groups, including ex-offenders.

Diversity and inclusion

We have a responsibility to create an

environment where people are proud of

whothey are and feel they can be themselves.

Wehave a number of partners helping us on

our journey to a place where everybody can

bring their whole self to work.

We have established several team member

networks, including the Marston’s Pride

Network, connecting and supporting our

LGBTQ+ team members, and the Women of

Marston’s Engagement Network (WOMEN),

bringing women and allies together in a

safeand supportive environment; to make

connections, facilitate success through strong

peer support, input into key policies and

programmes, drive necessary change and

empower women in their professional and

personal development. We have partnered

with WiHTL for a number of years, a

Collaboration Community devoted to

increasing diversity and inclusion across

Hospitality, Travel and Leisure, and are proud

signatories of the Diversity in HTL Charter.

We have also partnered with The Burnt Chef

Project, who provide mental health support

forthe hospitality trade and, with their support,

this year we have trained hundreds of our line

managers in mental health and resilience

andwe now have an area on our eLearning

platform, Campus, that is dedicated to the

Burnt Chef resources and tools to help with

mental health.

We recently became signatories of the

Businessin the Community Race at Work

Charter. The seven key actions we have

committed to will improve the quality of

opportunity at Marston’s. During the FY2023

wewill also expand our networks to men,

raceand ethnicity and disability.

HIGHLIGHTS OF 2022

No. of apprentices in our business

326

Relevant stakeholders

1. People

2. Communities

3. Government

READ MORE ON PAGE 45

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

WE RAISE

THE BAR

STRATEGY IN ACTION CONTINUED

Training and development

We have introduced a more agile and

dynamic training and development

agendainto Marston’s through our two

digitalplatforms, Attensi and Campus, to

ensure we can identify development needs

quickly and offer innovative training solutions.

Alongside these we have launched a digital

review platform to facilitate more frequent

performance and development conversations,

and the ‘Aspire’ programme which is intended

to develop team members aspiring to run their

own pub for the first time.

Communication and engagement

Team engagement is one of the critical

success factors of our business. We have

continued to use our employee engagement

system, Peakon, which enables monthly

feedback to and from our people. Despite

thechallenging backdrop, our Peakon

engagement remains strong and what is most

pleasing is that in the final quarter, over half

ofour c.12,000 employees participated in the

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.

Operational excellence

We aspire to achieve the goals underpinning

the vision of ‘Pubs to be proud of’ in all of our

pubs and we have improved the quality and

experience of our operations team this year.

In addition to providing an excellent guest

experience (evidenced through the

Reputation score), we remain focused

onensuring that the guest experience is

delivered in pubs that are also operating to

the appropriate standards, and EHO scores

remain a core pub goal which we measure

and monitor each month. To support this,

wehave launched various initiatives in

thereporting year including a standards

drive and a new audit app. Recognising

theimportance of health and safety,

EHOscores are also included in most

ofourbonusschemes.

In H2 of 2022 we rolled out a new labour

scheduling system which, amongst other

benefits, helps ensure that we are deploying

the right quantum of labour at the right time

in a challenging labour market.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

STRATEGY IN ACTION CONTINUED

WE WILL

GROW

We challenge

ourselves, and

each other, to

ensure we’re

always

improving

and moving

forward

Effective capital expenditure –

‘MakeCapex Great’

One of the key drivers of our plan for organic

growth is the capital investment programme;

for both the maintenance of our estate and

conversions in line with the estate format

aspirations described on the previous page.

Our investment capital plans are clearly

defined by format and, as such, we have

clear visibility and a pipeline of pubs we plan

to convert. This provides us with sufficient

lead time ahead of the investment itself and

permits our commercial, recruitment and

training teams to comprehensively plan,

execute and support each investment and

conversion. In FY2022 we completed 22

transformational conversions and, despite

the economic environment, we still intend to

convert the remaining c.100 food-led pubs at

the appropriate level of investment to

achieve the format evolution described.

In addition, our observation following the

pandemic is that the demand to eat and

drink in high quality outside space is strong

and is a differentiator between pubs. As such

we are allocating £4 million on a garden

investment programme in FY2023, including

20 larger garden schemes.

From a maintenance perspective, it is critical

that the fabric of our pubs is not compromised,

regardless of format. This supports delivering a

great guest experience as well as maintaining

the underlying value of our assets.

We have formalised the planned

maintenance programme and reduced the

maintenance cycle from six to four years. Our

aspiration is to reduce this further to three

years, in the medium term.

Continued evolution of franchise

Marston’s has been the forerunner of the

franchise-style model since its introduction

in2009, and it is clear that the owner/

entrepreneur mentality of a turnover pub

partner drives sales growth in our pubs. In

2021 we introduced a unique new franchise-

style agreement, called ‘Pillar’, which

enabled pubs with an independent food

offer to receive all of the positive elements

ofa franchise-style arrangement without

compromising their food proposition. We

nowhave 64 pubs operating under a Pillar

agreement. In addition, we are trialling the

franchise model in four food-led pubs that

were formerly part of our managed estate

and it is our intention to extend this trial

further in FY2023.

Developing a stronger digital agenda

We recognised that from a digital perspective

Marston’s has a significant opportunity to

grow volume. We have appointed a new

Director of Digital, with an abundance of

sector experience. The digital strategy

wehave subsequently embarked upon

combinesacquisition activity through the

development of third-party partnership

relationships, and the development of a

targeted individualised digital marketing

programme aimed at increasing frequency

ofvisit from our existing guests.

Creating a stronger sales culture –

‘Never full, fancy another’

We are seeking to engender a more

entrepreneurial culture through all of

ourpubs irrespective of whether they

aremanaged or a Pub Partnership. Our

salesmantra underpins the definition of a

successful pub – a great pub is never full

(wecan always fit you in) and great pub

teams always ask our guests if they would

likesomething else.

Project Boost is designed to create a reward

structure over and above the base salary

and bonus scheme or Pub Partner share,

torecognise and celebrate outstanding

performance. We removed the cap on our

operational bonuses ensuring our pub teams

and Pub Partners are focused on maximising

sales over and above the annual targets. In

addition, we have recently announced a

series of quarterly ‘retain it or lose it’ reward

schemes relating to guest satisfaction scores,

EHO and employee engagement with the

qualifying licensees receiving a cash reward

at the end of each quarter.

HIGHLIGHT OF 2022

No. of pubs operating under

aPillaragreement

Relevant stakeholders

1. Pub Partners

2. Investors

3. Communities

READ MORE ON PAGE 45

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

GROUP OPERATIONAL AND FINANCIAL REVIEW

Performance and financial review

Revenue

Revenue increased by 99% to £799.6 million

(2021: £401.7 million from continuing

operations), principally reflecting recovery

from a period severely impacted by COVID-19

and the significant restrictions topub trading

during the prior year.

Trading this year has been impacted by

theOmicron variant of COVID-19. Whilst the

pubs were not required to shut in England,

government recommendations for social

distancing, restricted trading in Scotland

andWales and consumer concerns saw a

drop in visits and revenue during December

2021 and January 2022, the impact of which

wasan estimated reduction to revenue

of£16million and EBITDA of £8–10 million

compared to a pre-pandemic financial year.

For the year as a whole, like-for-like retail

sales are slightly down (1%) relative to 2019

levels, the last pre-pandemic trading year,

which is expected given the impact of

theOmicron variant during H1. However,

like-for-like retail sales for the 10 weeks to

theend of the year were 3% up compared

to2019 and 4% up compared to 2021,

showing encouraging recovery and the

positive impact of our strategy.

Total retail sales in the Group’s 1,198

managed and franchise pubs increased by

100% to £734.1 million (2021: £367.8 million)

and total outlet sales increased by 101% to

£757.2 million (2021: £376.3 million).

Within our pub business we operated

267pubs under the traditional tenanted

andleased model generating revenues of

£42.4million (2021: £25.4 million). It is still our

intention to convert the remainder of the

tenanted and leased estate to turnover

based models in the medium term.

Accommodation sales of £33.1 million

showsignificant growth (2021: £17.2 million),

benefitting from the demand for UK

staycations.

Profit

Underlying operating profit excluding

income from associates was £115.4 million

(2021: £5.7 million) with a margin of 14.4%

(2021: 1.4%); H1 margin was 10.8% and H2

margin was 17.6%. Underlying operating

profitincluding income from associates was

£118.7million (2021: loss of £(8.8) million).

Underlying EBITDA excluding income

fromassociates was £159.6 million

(2021:£48.4million), and underlying profit

before tax was £27.7 million (2021: loss of

£(101.3) million). Profit before tax was

£163.4million (2021: loss of £(171.1) million).

FY2021 comparison numbers exclude

discontinued operations.

The difference between underlying

profitbefore tax and profit before tax is

£135.7 million of non-underlying items, which

includes a £109.2 million net gain in respect

ofinterest rate swap movements and a

£21.6million net reversal of impairment to

thefreehold and leasehold property values.

Like-for-like retail

sales for the 10 weeks

to the end of the year

were 4% up, showing

encouraging recovery

and the positive impact

of our strategy.

HAYLEIGH LUPINO

CHIEF FINANCIAL OFFICER

Financial highlights

Underlying

Total

2022 2021 2022 2021

Total revenue £799.6m £401.7m £799.6m £401.7m

Pub operating profit/(loss) £115.4m £5.7m £142.1m £(90.5)m

Share of associate £3.3m £(14.5)m £3.3m £(14.5)m

Profit/(loss) before tax £27.7m £(101.3)m £163.4m £(171.1)m

Net profit/(loss) £27.5m £(86.2)m £137.2m £(128.3)m

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

NAV per share £1.02 £0.64

1 From continuing operations.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

GROUP OPERATIONAL AND FINANCIAL REVIEW CONTINUED

Performance and financial review

Interest

Our borrowing is largely long-dated and

asset-backed. The securitisation is in place

until 2035 which provides financing security

and high visibility of future cash flows; this is

ofparticular importance in an environment

where interest rates are rising to curb

inflation. The securitisation is fully hedged

until 2035. Other lease related borrowings are

index linked, capped and collared at 1%–4%,

providing protection against high inflation.

Ofour £280 million bank facility, £120 million

isnow hedged. Overall, we are 90% hedged,

providing significant protection against

changes in interest rate movements that may

occur during the year.

Since the financial year end, the £60 million

forward floating-to-fixed interest rate swap

which was due to take effect from April 2025

was brought forward and started in

October2022.

Taxation

Underlying profit before tax was £27.7 million

(2021: loss of £(101.3) million from continuing

operations), upon which the total underlying

tax charge was £0.2 million (2021: credit of

£15.1 million). This gives an underlying rate of

taxation of 0.7% (2021: 14.9%). The effective

taxrate is lower than the standard rate of

corporation tax primarily due to super-

deductions, post-tax share of income from

associates and a credit in respect of deferred

tax on property.

The total tax charge is £26.2 million

(2021:creditof £42.8 million) on total profit

before tax of £163.4 million (2021: loss of

£(171.1)million from continuing operations),

with aneffective tax rate of 16%.

Total tax contribution in 2021/22

VAT – £75.1m

Employee payroll taxes – £35.0m

Business rates – £27.9m

Employer payroll taxes – £15.5m

Other – £3.8m

Corporation tax – £0.0m

£157.2M

Non-underlying items

There is a net non-underlying credit of

£135.7million before tax and £109.7 million

after tax. The credit primarily relates to a

£109.2million net gain in respect of interest

rate swap movements and a net reversal of

impairment of £21.6 million to the freehold

and leasehold property values following the

external estate valuation of the Group’s

effective freehold properties and the

impairment review of the Group’s leasehold

properties undertaken during the year.

Other non-underlying items comprise a

£0.7million charge in respect of the fair

valueof the contingent consideration

fromthe disposal of the Group’s brewing

operations and a £5.6 million credit for VAT

claims submitted to HM Revenue & Customs

inrespect of the VAT treatment of gaming

machines from 1 January 2006 to 31 January

2013. An explanation of non-underlying items

is included within note 4.

The tax charge relating to these non-

underlying items is £26.0 million.

Earnings per share

Total earnings per share were 21.7 pence per

share (2021: 25.7 pence per share). Underlying

earnings per share were 4.3 pence per share

(2021: (13.4) pence loss per share).

Capital expenditure and disposals

Capital expenditure was £70.1 million in

theyear (2021: £46.6 million). We expect that

capital expenditure will be around £65 million

in 2023. Included in this year’s expenditure

isthe refurbishment of our new head office,

St Johns House, which was largely completed

during FY2022 but will be financed in FY2023.

Proceeds of £9.9 million have been realised in

relation to the disposal of non-core pubs and

unlicensed properties, which achieved a 40%

higher price than the net book value.

Property

The Group has moved to annual external

valuations of its properties and all pubs

willbe inspected on a rotational basis, with

approximately one third of the estate being

inspected each year and the remainder

subject to a desktop valuation. Christie & Co

undertook an external valuation in July 2022

and the results have been reflected in the full

year accounts.

The carrying value of the estate is now

£2.1billion and, as a result of the valuation

andleasehold impairment review, there is

aneffective freehold impairment reversal

of£88.4 million and a leasehold impairment

reversal of £5.0 million, giving a £93.4 million

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

GROUP OPERATIONAL AND FINANCIAL REVIEW CONTINUED

Performance and financial review

Share of Associate (Carlsberg

Marston’s Brewing Company (CMBC))

The income from CMBC of £3.3million

(2021:loss of £(14.5) million) reflects the

Group’s share of the statutory profit after

taxgenerated by CMBC in the period.

WhilstCMBC’s results show a recovery from

last year, they also reflect the impact of the

Omicron variant during the year; H1 saw

anoperating loss of £(2.0) million.

Dividends from associates of £19.4 million

werereceived (2021: £nil), primarily resulting

from one-off working capital movements.

Dividends for this financial year were forecast

to be £nil at the time of our interim results due

to the significant disruption to trading in the

year (including the impact of Omicron) and

the potential for continuing uncertainty

asaresult of cost inflation, uncertainty

resultingfrom the war in Ukraine and the

macroeconomic environment. However,

weremain confident that there will be regular

future dividends from CMBC when there is a

return to more normalised market conditions.

Pensions

The balance on our final salary scheme was

a£15.1 million surplus at 1 October 2022 which

compares favourably to the £14.4 million

deficit at last year end. This improvement

hasbeen primarily driven by the increase

inthe discount rate assumption, from 2.0%

inOctober 2021 to 5.2% in October 2022,

reflecting the increase in corporate bond

yields since the year end, partially offset by

reductions in asset values. The net annual

cash contribution is c.£6m and is only

expected to continue for the next 2–3 years.

Debt and financing

The Group remained focused on cash

management during the year, particularly

during periods where trading was impacted

by the Omicron variant. We continued to

prioritise cash preservation throughout

thedisrupted trading period, but also

maintained an appropriate level of pub

investment to ensure our pubs were well

positioned to deliver our strategy.

The Group generated a net cash inflow for

the period of £26.2 million including IFRS 16

(£17.7 million excluding IFRS 16). This would

have been £48.2 million excluding the net

outflow of £22.0 million for the one-off

payments outlined in our interim results

relating to deferred duty/VAT and the

CMBCcontingent consideration.

Net debt, excluding IFRS 16 lease liabilities,

was £1,216 million, a decrease of £16 million

from last year (2021: £1,232 million). Total net

debt of £1,594 million (2021: £1,604 million)

includes lease liabilities of £378 million

(2021:£372 million).

There was an operating cash inflow of

£134.0million in the year, significantly

aheadof last year (2021: £34.7 million),

principally reflecting higher profits in

theyear.

The Group has a range of medium

andlong-term financing providing an

appropriate level of flexibility and liquidity

forthe medium term: a £280 million bank

facility to March 2024 – at the period end

£215 million was drawn providing headroom

of£65million and non-securitised cash

balances were £10 million; a £40 million

private placement in place until 2024;

aseasonal overdraft of £20 million from

25January to 6 May and 1 July to 12 August

each year reducing to £5 million for the

remainder of each year – which was not used

at the period end; a long-term securitisation

of approximately £655 million – we satisfied

the scheduled repayments demonstrating

solid cash generation even under trading

restrictions in Q1 and, at the period close

there is £15 million of the £120 million

securitisation liquidity facility utilised;

long-term other lease related borrowings of

£338 million; and £378 million of IFRS 16 leases.

The securitisation is fully hedged to 2035.

Additionally, the Group’s mark-to-market

position on its interest rate swaps has reduced

substantially in view of interest rate rises.

Otherlease related borrowing is index-linked

capped and collared at 1% and 4%. There are

£120 million of swaps against the bank facility:

£60 million is fixed at 4% until 2031 and

£60million is now fixed at 3.45% until 2029.

In the 2021 financial statements it was

highlighted that the Group would require

further amendments to its covenants in

financial year 2022. The Group was granted

the required waivers or amendments to its

financial covenants across the lending banks

and private placement provider; these were

required due to the continued recovery from

COVID-19 and theimpact of Omicron in H1.

Theamended covenant tests were met.

Nosecuritisation waivers or amendments

were required.

We continued to receive strong support

fromour stakeholders for amendments and

worked in acollaborative approach, helped

by open andconstructive dialogue in a

period of uncertainty, which underlines the

importance of good, long-term relationships

with all our stakeholders, and we thank them

for their continued support.

The Group is in positive discussions with

itslending banks and private placement

provider to agree further covenant

amendments covering FY2023 before

31December 2022; these are required due

tothe continued recovery from COVID-19

andimpact from Omicron in H1. Given our

experiences to date we are very confident of

securing these where necessary. This has been

disclosed as a material uncertainty in the

financial statements.

In summary, we have adequate cash

headroom in our bank facility to provide

operational liquidity. There is also a £120

million liquidity facility in the securitisation to

protect bondholders in the event of a default

– this equates to 18 months of debt service

payments. £15 million is currently drawn on this

and is included in the above £655 million.

Importantly, over 90% of our medium- to

long-term financing is hedged, thereby

minimising any exposure to interest rate

increases that may arise over the next

fewyears.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

SECTION 172(1) STATEMENT

Stakeholder considerations play an

important part in the Board’s discussions

and decision-making process.

Stakeholder interests help shape our

performance and, in doing so, promote

the long-term success of the Company,

as set out in this statement.

During the period ended 1 October 2022, the

Board has acted in accordance with section

172(1) of the Companies Act 2006 (the ‘Act’).

Each Director of the Board has acted in a

way they consider, in good faith, to promote

the long-term success of the Company for

the benefit of its members. In doing so, the

Directors have had regard to the interests

ofthe stakeholders and factors set out

insection 172(1) (a) to (f) of the Act.

Thisincludes the interests of our investors,

employees, Pub Partners, suppliers and

guests, and the impact our pub estate has

onthe environment and the communities

weserve, whilst maintaining high standards

of business conduct.

The Board recognises the value of engaging

with stakeholders to understand their views,

objectives and interests so that they may be

properly considered in the Board’s decision-

making. Each Director is mindful of their

directors’ duties and, this year they received

refresher training on those duties and the Act.

Details of our key stakeholder groups,

andhow the Company and the Board

haveengaged with them during the year,

are set out in the Stakeholder Engagement

section on pages 21 to 23. Stakeholder

engagement takes many forms including

direct engagement with our investors, guests

and employees and indirect engagement

through regular presentations and reports

from the Executive Directors, the Executive

Committee and senior management.

Direct employee engagement is conducted

through Bridget Lea, our nominated Non-

Executive Director for Workforce Engagement,

and the Board regularly receives a summary

of the results of our monthly employee

engagement surveys, from the HR Director.

Pub visits, regular days ‘in trade’ and Board

dinners provide an additional opportunity

forthe Board to engage directly with our

employees and Pub Partners in a less formal

setting. In addition, the Directors engage

directly with our investors. Engagement with

our suppliers, guests and other stakeholders

takes place at an operational level through

the relevant senior manager with the Board

receiving updates via the Executive Directors.

Finally, our ‘Doing more to be proud of’

initiative oversees stakeholder engagement

on behalf of the Board on Environmental,

Social and Governance (ESG) matters and

further details are set out on pages 24 to 25.

The interests of employees, investors and other stakeholders are taken into account by the

Board in all decision-making but particularly so when considering matters of strategic

importance. Examples of some of the principal decisions that have been taken during the

year and how Section 172(1) considerations have been factored into the Board’s decision-

making are set out below.

Board decision Section 172 duties Board discussion Read more

In March 2022, the Board

approved covenant waivers

and amendments to the

Company’s revolving credit

facility agreement dated

7March 2017 and is in

discussions to agree further

amendments for 2023.

Consequences of

decisions in the

long-term.

• Consideration of the financial

stability of the Group and its

long-term sustainability for the

benefit of all stakeholders.

Page 19

In January 2022, the Board

unanimously agreed a

move away from being a

National Minimum Wage

(NMW) employer.

The interests of a broad

range stakeholder

groups, including the

Company’s employees,

guests and the

Government.

• Consideration of and benefit

tothe Company’s employees

• The benefit to the long-term

success of the Company as

aconsequence of improved

employee retention rates and

avoiding the volatility of the

labour market.

• The positive impact on

guestsatisfaction as a result

ofimproved speed of service

andmore experienced and

engaged pub teams.

• Supporting the Government

and wider community by

contributing to economic

growth.

Page 32

In October 2021 the Board

were presented with, and

considered, our ESG targets

for Net Zero and food

waste.

The impact of

theCompany’s

operations on the

community and

theenvironment.

The interests of guests

and employees.

• Linking the Company’s

strategy with its ESG strategy,

which will benefit a broad

range of stakeholders.

Page 24

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

STAKEHOLDER ENGAGEMENT

Our people

Our Pub Partners

Priorities

• Pay, benefits and conditions

• Clear, concise communication

• Support, training and development

• Wellbeing, diversity and inclusion

Priorities

• Support, training and development

• Operational success and growth

• Reward and recognition

Our people are the heart of our business. Effective employee engagement is central to our

strategy and we recognise that the quality and commitment of our people is integral to our

long-term success. Achieving an engagement score of 8 or more on our employee engagement

survey is one of our Key Performance Indicators (KPIs). We recognise the importance of having an

open relationship with our workforce and investing in tools that empower them to have their say.

We have around 976 pubs that are operated by self-employed Pub Partners under several types

of franchise-style agreements, each providing flexible operating models. Most recently, in 2021,

we launched the innovative Pillar Partnership. As with all our franchise-style models, other than

labour, most of the operating costs (such as energy bills and other utilities) are paid for by

Marston’s, allowing our Pub Partners to focus on running their business and giving guests

thebestpossible experience.

How the Board has engaged

• All employees are invited to express their

views on a confidential basis by completing

the Peakon employee engagement surveys.

The Board receives a monthly report on the

aggregate engagement score and key

themes, and outputs from the surveys are

discussed throughout the year.

• Bridget Lea is our designated Non-executive

Director for Workforce Engagement with

ourworkforce. We were pleased to resume

our programme for employee engagement

this year, following the disruption caused

byCOVID-19. Unfortunately, the planned

‘inperson’ engagement session coincided

with the funeral of Queen Elizabeth II, so the

session was rearranged for the following

month (October 2022) and hosted digitally

toensure that the majority of the original

employees were still able to attend. Bridget

and Octavia Morley, Senior Independent

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

How the Board has engaged

• As part of the suite of training and support

available to them, our Pub Partners receive

complementary access to the employee

engagement survey operated by Peakon.

This enables Pub Partners to share their

views and help shape their experience

atMarston’s. These scores are included

inthe monthly reports seen by the Board.

key topics were discussed: the Directors’

Remuneration Policy, communication

andcollaboration between teams, and

alignment of incentive schemes through

thebusiness.

• The Board received presentations from the

HR Director and his team on a number of

workforce related matters including the

People Promise, which has been developed

and refined following feedback from focus

groups from a cross-section of our

workforce.

• The Board met with a number of senior

managers and Pub Partners during the

year, through presentations at Board

meetings, Board dinners and visits to our

pubs, including a day ‘in trade’ for the

whole Board visiting a number of sites in

Wales we acquired as part of the

transaction with SA Brain.

• The Board receives separate monthly

reports from our Operational Directors for

food-led and for drink-led pubs and these

reports include information on our Pub

Partnerships.

• The CEO and CFO, together with our

Leadership Group and Operational

Directors, participate in direct engagement

with our Pub Partners throughout the year

by frequent visits to pubs and days in trade.

READ MORE ON PAGE 60 READ MORE ON PAGE 34

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

STAKEHOLDER ENGAGEMENT CONTINUED

Our guests

Our suppliers

Priorities

• Speed of service

• Quality of food and drink

• Atmosphere and experience

• Value for money

Priorities

• Long-term supply partnerships

• Clarity around our strategy, objectives

and sustainability agenda

• Fair and transparent procurement and

business processes

We truly are ‘guest obsessed’ and we

consider the voice of our guests in almost

everything we do. Being loved by our guests

and achieving a Reputation score of 800 or

more, is one of our KPIs.

Reputation generates a score for each of

ourpubs based on guest feedback across

multiple channels and platforms, such as

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.

Our suppliers play an important role in

helping us deliver our strategy and providing

our guests with the best possible experience.

We value long-term partnerships with our

suppliers to form strong, sustainable and

trusted relationships whilst minimising risk in

our supply chain.

How the Board has engaged

• The Board receives a monthly report on our

aggregate Reputation score and how this

compares to our competitors. Key themes

and drivers for guest satisfaction taken from

Reputation are presented periodically, at

Board meetings by our Commercial

Marketing Director and her team.

• The CEO and CFO (together with our

Leadership Group and operational

directors) have direct engagement with

our guests throughout the year when

visiting pubs on days in trade.

• The results of qualitative guest focus

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.

How the Board has engaged

• The Board receives monthly updates and

reports from the CFO on any key tenders

and supply chain issues.

• During the year, the CEO and CFO

engaged directly with key suppliers by

participating in meetings and site visits.

• Our CEO and CFO are Non-executive

Directors of CMBC, our exclusive drinks

distribution partner, and provide the

Board with regular updates on supply

chain and other matters in support of our

40% share in CMBC.

The environment and communities

Priorities

• Responsibility and sustainability

• Social value and purpose for our people,

partners and the communities we serve

• The policies and processes we have in

place to protect the health, safety and

wellbeing of our people, guests, Pub

Partners and the wider community

• Reducing carbon emissions and food waste

from our operations

• Leadership and governance, including

transparency in ESG reporting

In line with our corporate goals, we are committed to being a responsible and sustainable

business. We are proud to give something back to the communities we serve and, in doing so,

create value for all our stakeholders, including the planet. Both Marston’s and our Pub Partners

play an active role in our communities, supporting them through charitable endeavours and

generating a positive impact at a local level. We’re committed to doing the right thing and

delivering the objectives set out in ‘Doing more to be proud of’, our ESG initiative. The evolution of

our ESG strategy this year involved us engaging and consulting with a wide range of stakeholders

to understand what ESG topics mattered to them most, including our guests, our people, advisers

and experts and other companies within our sector and beyond.

How the Board has engaged

• The ‘Doing more to be proud of’ working

group oversees stakeholder engagement

on behalf of the Board on ESG matters.

• The Board receives regular updates, reports

and presentations on how the business is

progressing and the initiatives being

undertaken across our business.

• The Executive Committee receives monthly

updates on health and safety and food

safety compliance and, a monthly

summary is provided to the Board, in

addition to the annual presentation from

the Director of Safety.

• The Board received an update on actions

taken during the last financial year to help

eradicate modern slavery, such as our

useof SEDEX to gain access to ethical

information about our suppliers, and

approved the Company’s Modern Slavery

Statement in January 2022.

READ MORE ON PAGE 9 READ MORE ON PAGES 24–40

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

STAKEHOLDER ENGAGEMENT CONTINUED

Our investors

Government and regulators

Priorities

• Financial and business performance

• Progress against our strategic objectives

• Macro factors, such as consumer

confidence and inflationary and cost

pressures

• Progress against our Environmental, Social

and Governance (ESG) targets

Priorities

• Creation of jobs and investment

• Long-term sustainable business model

• Payment of taxes

• High standards of business conduct and

compliance

An analysis of our shareholder register by investor type appears on page 168. Engagement with

our shareholders is essential to ensure that we attract and retain long-term investors who support

our strategy. In turn, we strive to ensure that we provide fair, balanced and understandable

information to shareholders and analysts alike, to ensure that they understand and support our

strategy and vision, and have clarity over our financial and non-financial performance.

We take our responsibilities for the health and wellbeing of our guests and employees very

seriously. Our relationships with our Primary Authority, and various other regulatory bodies, help us

to ensure we comply with new and emerging legislation in food and drink, health and safety and

beyond. This is supported by the Company’s Risk & Compliance Committee.

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

• The Board regularly receives updates

fromthe Chair, CEO and CFO on investor

relations and other shareholder activity

orfeedback.

• Our CEO and CFO have regular face-to-

face meetings with analysts, private client

fund managers and large shareholders.

TheChair and Senior Independent Director

have regular contact with investors and

analysts and are available to meet with

large shareholders.

• The Annual General Meeting (AGM),

ourAnnual Report and Accounts and our

website also provide key communication

channels for our investor community.

Periodic announcements on our business

and financial performance, issued to

thestock market are also available on

ourwebsite.

• Dialogue with shareholder groups and

investors on various topics, including ESG.

How the Board has engaged

• The Board receives regular updates on

labour and resourcing and approved

several initiatives during the last financial

year, including changes to the National

Minimum Wage.

• Our Operational Director for wet-led pubs

met with various Members of Parliament

and the Chair of the All-Party Parliamentary

Group for Beer, and attended the House of

Commons to participate in the statutory

review of the Pubs Code undertaken

byBEIS.

• Our CEO regularly meets, and engages

with, UK Hospitality to discuss sector-wide

matters. Senior managers and operational

directors also engage at a business level

byparticipating in working groups and

consultations. Updates are provided to the

Board in the form of reports and

presentations, from time to time.

• Octavia Morley, our Senior Independent

Director, participated in direct engagement

with our largest shareholders on executive

remuneration, this year.

• An investor relations programme is managed

by the CEO and CFO, in conjunction with our

advisers, focuses on engagement with

institutional shareholders, fund managers,

analysts and private client fund managers.

• On behalf of the Board, the General

Counsel and Company Secretary oversees

communication with private individual

shareholders. The key source of

communication is through the Investors

section of the corporate website, which

provides a wealth of information on our

strategy and vision, links to our share price,

financial calendar, results presentations

and regulatory announcements.

• The AGM provides an opportunity for

shareholders to attend the meeting in

person, to engage directly with the Board

or ask questions in advance.

• Engaging directly with the Pubs Code

Adjudicator and providing bi-annual

reports on Pub Code compliance to

theAudit Committee, in line with our

statutory duties.

• Continued work at a business level with

Public Health England, the Office of Health

Improvement and Disparities (OHID) and

Drinkaware, with any key or strategic

matters being reported to the Board in

theCEO’s monthly report.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS

Doing more to be proud of

We are passionate about delivering our

ESG and sustainability strategy: ‘Doing

more to be proud of.’ Whilst there is still

more to do, we believe we can make

meaningful contributions to all our

stakeholders, from cutting carbon

emissions and tackling food waste, to

caring for our people and encouraging

them to grow, and supporting the

communities in which we operate.

Alignment of ESG to our business

At Marston’s we have invested in sustainable

and responsible business practices for many

years, including being amongst the first in our

sector to implement environmental initiatives,

such as zero waste to landfill and the

installation of electric car chargers across our

pub estate. We recognise that there is still

more to do, particularly to help protect the

planet (our most fragile stakeholder). This year,

we have focused on defining our ESG

strategy, engaging and consulting with our

stakeholders to understand what ESG pillars

matter to them most. We have aligned our

ESG strategy to our corporate strategy, and to

how we operate our business. This alignment

has provided clarity of vision, helped establish

ownership, drive improvements and facilitated

improved reporting on the progress that we

have made, and will continue to make.

Previously we relied upon an ESG

Committeeto cover the broad range of

areas collectively referred to as corporate

responsibility. Following engagement with

key stakeholders, given the diverse nature

ofour stakeholder interests, it was clear that

there was an opportunity to better align

those interests with our structure. Our senior

leaders are empowered to engage with

stakeholders at a business and operational

level, and to deliver the part of our ESG and

sustainability strategy that is most closely

affiliated with their individual specialism.

The ‘Doing more to be proud of’ initiative was

developed and three distinct working groups

have been established with a clear mandate,

objectives and targets. Some areas, such as

health and safety and food waste, naturally

have more than one touch point and provide

more opportunities for working together

andharnessing the power of cross-

functionalexpertise.

Progress made by all three working groups is

regularly reviewed by the General Counsel

&Company Secretary, who also has overall

responsibility at Executive Committee and

business level for ‘Doing more to be proud of’

and oversees stakeholder engagement on

ESG matters on behalf of the Board.

The initiatives we take on ESG are linked

toour key stakeholders and what matters

tothem most, whilst being aligned to

andforming an integral part of our

corporatestrategy.

TARGETS

• Carbon neutrality by 2030

(Scope 1 & 2 emissions)

• Net Zero by 2040

(Scope 3)

• 50% reduction in food waste

by2030

ACHIEVEMENTS

• 7. 8

Employee engagement score

• 3.9

FTSE4Good rating

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

Doing more to be proud of

We are guest

obsessed

We raise

the bar

We will

grow

Key:

Leadership

Group Responsibility Key focus areas for2023

Link to

strategy

Key commitments

andgoals Other areas of focus

ENVIRONMENT

Director

of Property

Net Zero: targets announced and strategy development, including a

move towards the electrification of our pub estate supported by

internal incentives such as ‘Going Green’

Carbon neutrality by 2030

(Scope 1 & 2 emissions).

Net Zero by 2040 (Scope 3)

• Reduction of energy and water consumption

• Environmental policy and strategy

• Responsible management of our pub estate

READ MORE ON PAGES 43–52

Policy administration: oversight and ownership

Enterprise Risk Management: strategic alignment to risks, control

effectiveness tracking

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

Working together to create a sustainable future for our business, for the benefit of all our stakeholders

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

Environment

Doing more

to reduce our

environmental

impact

In recent years our estates team has gained industry

recognition for their pioneering work to reduce emissions

atour pubs, reduce water consumption and increase

recycling levels.

Our Director of Property

was awarded ‘The Special

Achievement Award’

atthe Footprint Drinks

Sustainability Awards

We remain responsive to emerging

technology to prevent further environmental

harm, to current economic events, and to

partnerships which promote and support a

better environment and better lives for all.

Net Zero

Our Net Zero targets are:

• Carbon neutrality by 2030 (Scope 1 & 2

emissions).

• Net Zero by 2040 (Scope 3).

• The use of carbon offsets to cover

remaining emissions, which cannot be

mitigated using other actions.

Our Net Zero strategy has been developed in

alignment with the Zero Carbon Forum (ZCF),

a hospitality sector body which shares

expertise for the mutual purpose of achieving

Net Zero. The Forum aims to support the

sector to decarbonise at pace and to reach

Net Zero by 2040.

The ZCF’s data findings for the pub sector

show that 9% of emissions come from Scope 1

& 2 (e.g. fuel and electricity consumed

directly) and 91% of emissions are associated

with Scope 3 (e.g. purchased good and

services and logistics).

The key challenges for Marston’s, and our

supply chain, will include: decarbonisation of

heat generation, procurement of lower

carbon goods and services, and a move to

renewable fuels for logistics operations.

Residual emissions are likely to remain that

cannot be reduced or removed and these

will need to be offset.

To achieve our Net Zero target, future

business decisions will need to take into

account the effect on emissions. As the

business proceeds on the path to carbon

neutrality, operating and procurement costs

could be impacted in the short term but

making these adjustments sooner may mean

that we can reduce long-term costs.

As well as having a positive impact on the

planet, mitigation and adaption to climate

change presents opportunities including

lowering operating costs, reducing

reputational risks and future-proofing the

business. We are taking an active approach

to identify, approve and implement carbon

reduction projects. This is a focus for the

Environmental Working Group in the year

ahead, together with scoping out how we

will deliver our Net Zero strategy.

Environmental Working Group

Following the restructure of our ESG

Committee explained on page 24, under

thestewardship of our Director of Property,

weformed an Environmental Working Group.

Itis the responsibility of the group to

recommend, develop and deliver carbon

reduction projects which will move Marston’s

forward in its journey toward Net Zero. The

Working Group is chaired by our Energy

Manager and includes team members

fromestates, procurement, finance, pub

operations, food development and risk. They

meet quarterly and their work this year has

included identifying the optimal timing for

investment in new technologies, and our

progression toward renewable sources

ofenergy.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

Environment

Waste and resource management

We are consistently above a 70% recycling

rate and have reached as high a rate as 80%.

We work with waste providers to ensure we

operate a zero waste to landfill business and

all non-recyclables that are able to, go to

energyrecovery.

Annually we audit hundreds of our pubs to

ensure they are utilising their recycling streams

correctly, to identify more opportunities to

increase recycling streams and prevent

recyclable items going into general waste.

The audits also enable us to optimise the

number of journeys our waste contractors are

carrying out, reducing the carbon associated

with these collections.

Food production is carbon intensive and food

waste compounds the issue. We are working

on initiatives to reduce food waste and to

achieve our target to reduce food waste by

50% by 2030, including menu rationalisation.

Further details are set out in the ‘Food Waste’

section. Any residual food waste at pub level is

taken to anaerobic digestion sites, where it is

used to produce biogas and fertiliser.

Capital investment projects

During the year, an estate review was

completed to identify the position of the

estate in terms of efficiency and readiness for

future investment in low carbon technology.

This included:

• Analysis of supplier and EPC data

• Electric capacity review

• Current building technology and low

carbon installations completed

• Review of application of on-site

renewable generation

Our capital maintenance and expenditure

programme presents an opportunity to

lowercarbon emissions and operating costs.

The standard measures included in any

refurbishment works in our pubs are as follows:

• LED lighting

• Insulation and draft proofing

• Heating and hot water controls

• Cellar fresh air cooling and management

systems

Dependant on the project, and

circumstances of the site, other low carbon

equipment may also be deployed.

Food waste

As well as a waste of resources, food waste

isamajor contributor to global carbon

emissions. Tackling it is in line with our strategic

objectives; we know it’s an important issue

forour guests and is intrinsic to raising our

standard of operation, as well as protecting

our operating margin.

All our food waste is measured by our

wastecollection partner. We regularly run

awareness campaigns for our team members,

to encourage them to segregate food waste

and maximise recycling opportunities. We

monitor the volume of food waste in order to

identify its cause and assess the effectiveness

of our campaigns.

We have set ourselves an ambitious target of

‘Doing more to be proud of’: 50% reduction

in food waste by 2030. The baseline is

financial year 2019 and the first year of

measurement was this financial year.

Following taking over the operation of the

SABrain estate, low carbon technologies are

in the process of being rolled out to bring

these properties in line with the rest of our

estate, including LED lighting and water

management systems.

Estate management

When new equipment is purchased for our

pubs, including catering and refrigeration

items, life cost analysis is completed. This

considers the useful life of the equipment,

energy costs, purchase costs, servicing

requirements and other operational costs

ofthe equipment. Whilst this methodology

considers life of equipment and energy costs,

it is recognised that it does not consider the

full carbon cycle of the equipment, which

the Environmental Working Group will seek

toaddress by aligning our procurement

processes with our Net Zero ambitions.

New equipment and technologies are

trialled ahead of any installation to validate

the operational efficiency, costs and

effectiveness. Trials are either completed in

our training facility or directly in the field to

gather adequate data. Once technologies

are proven, they may be rolled out across

ourestate.

Old equipment that fails or is beyond

economic repair is replaced with the latest

specification of equipment. This enables

improvement in energy efficiency and

carbon reductions to be made through

lifecycle replacement, and reduces the

carbon impacts through manufacturing.

In 2019, Marston’s produced 4,247 tonnes

offood waste, and this financial year we

haveproduced 3,266 tonnes. Whilst we

acknowledge that covers are lower than in

2019, and that there is still work to do, we are

delighted with what we have achieved so far.

A summary of the actions we have taken are

as follows:

• Menu and range rationalisation – as set

out on page 12, our menus have been

streamlined. As well as responding to

guest preferences, the rationalisation and

review process took into account dishes

that routinely resulted in waste being

returned to the kitchen; any such items or

dishes were subsequently modified or

removed. The simplification of our menus

has also resulted in efficiencies in our

supply chain and stock retention.

• Portion size review – in addition to range,

we reviewed portion sizes to optimise

guest preference and reduce waste.

Inour Signature pubs, chip portion size

was reduced from 284g to 234g.

• Supply chain initiatives – working with

oursuppliers to reduce waste at depot

level and trialling initiatives such as our

partnership with Too Good to Go.

• Education and reward campaigns – raising

awareness through in pub campaigns and

initiatives such as ‘Wise up to Waste’.

• Improved reporting – reporting waste

levels back to pub vs. covers, and the

introduction of an RAG rating for food

waste and working to improve

thoseratings.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

66,672

5,061

1,780

185

73,715

9.21

Electricity and gas

Petrol and diesel

Refrigerants – pubs

Liquefied petroleum gas (LPG)

Oil

Greenhouse Gas Emissions Intensity Ratio

e tonnes per £100,000 turnover

Energy usage

(Scope 1 & 2), mwhrs

Total

GHG emissions by source (CO

tonnes)2022 2021

57,484

5,012

1,700

302

64,564

16.07

364,867 302,031

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

Environment

We are currently trialling the Too Good to Go

app in 6 of our carvery sites which enables us

to connect with customers of Too Good to

Go and repurpose any meals that are left

over at the end of service. We are assessing

whether this can be rolled out across more

ofour pubs in the coming year. As well as an

opportunity to reduce food waste destined

for disposal, it also helps us to appeal to, and

welcome potentially new, guests to our pubs.

We also engage with WRAP to explore

opportunities to work with our wider supply

chain to reduce food waste and the

associated packaging waste.

emissions reduction

Our target for Net Zero is explained on the

previous page, together with the initiatives

we have implemented and our focus for the

year ahead. In addition, our ‘Going Green’

campaign was launched this year which is

aimed at encouraging our pub teams to

conserve energy and reduce emissions.

EMISSIONS DATA

Currently we do not report the Scope 3 emissions by our supply chain. We are working with

the Zero Carbon Forum and our suppliers to calculate this data in future years.

Notes to emissions data:

1. We report on all the measured emissions

sources required under the Companies Act

2006 (Strategic Report and Directors’ Reports)

Regulations 2013.

2. Data collected is in respect of the year ended

30 June 2022, in accordance with the

Streamlined Energy and Carbon Reporting

regulation.

3. Total gas consumption compared to last year

increased by 23%. Electricity consumption

increased by 20%. To reduce the energy

consumed we focus on various initiatives

each year. Our catering equipment is

sourced to increase efficiencies, including

fryers that filter oil to increase oil life, and high-

efficiency chargrills. All of Marston’s cabinet

refrigerators purchased are high-efficiency

hydrocarbon units. We install LED lighting in all

internal areas, and use integrated movement

sensors in our back of house areas, reducing

the operational hours of lighting. We installed

voltage optimisation in all of our new-build

sites and have retro-fitted them into other

sitesacross estate. This year, we have also

increased the proportion of electricity from

renewable sources, which now accounts for

10% of the energy consumed.

4. The Greenhouse gas emissions intensity

ratiowas distorted in 2021 by the trading

restrictions during the pandemic. While we

took steps to reduce energy usage in our

pubs when impacted by trading restrictions,

we still had to maintain refrigeration, heating

and lighting in order to trade, particularly in

those pubs where the manager lives on site.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

Environment – TCFD report

This is the first year that we have produced a

TCFDreport, detailing the impact of climate

changeon our business, which includes the risks

andopportunities it brings and the pathway towards

achieving carbon neutrality by 2030, and Net Zero

by 2040.

An Executive summary of the report is

includedbelow,and the full report is available at

www.marstonspubs.co.uk. Marston’s is determined

to play its part in meeting the challenge posed by

climate change. Our Net Zero plan will align our

business to the future low carbon economy.

Scope 1 & 2 CO

emissions

Energy consumed by our business (mwhrs)

73,715 64,564

2022 2021

364,867

2022

302,031

2021

We are making progress with industry partners

tocalculate the Scope 3 emissions for energy

consumed by our supply chain, and making

improvements as data becomes available

fromsuppliers.

Our emissions over the last three years were

impacted bythe pub lockdowns and trading

restrictions in 2021. The increase in emissions and

energy in 2022 predominantly reflects the lifting

ofthose restrictions.

TCFD disclosure compliance

The full financial impact of climate change and

NetZero cannot presently be quantified, though we

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%

as a potential impact.

Climate change viability

Risks are not significant enough to impact our viability.

Well placed to deal with challenges, seize

opportunities and adapt.

CORE BUSINESS ACTIVITIES IMPACTED

Drink supply Food supplyBuildings Logistics

to our pubs

KEY RISKS AND OPPORTUNITIES FOR OUR BUSINESS

KEY AREAS FOR ACTION ON CLIMATE CHANGE

OUR NET ZERO TARGET

Flooding

Extreme weather Legislation

Short term (1 to 5 years) Long term (over 10 years)

Consumer habits Technology Water scarcity

Procurement

Miles travelled, energy and resources

consumed.

Waste

Packaging waste, plastics, volume and

recycling levels.

Food wastage

Production, guests, storage and

supplychain.

Energy

Sourcing renewable energy, efficiencies,

mix of sources, reduction and emissions.

Carbon neutral by 2030

(Scope 1 & 2 emissions)

Carbon Net Zero 2040

(Scope 1, 2 & 3 emissions)

IMPACT SUMMARY

Two pubs at risk of annual flooding.

Flooding damage across the estate over

the past 10 years: £3.2m.

At present, no increasing trend of flood

damage costs impacting our pubs over

the last 10 years.

POINTS OF PROGRESS

Net Zero: move towards the

electrification of the estate.

Innovation – installation of 123 rapid EV

chargers in our pub estate, assisting our

guests to move to low carbon transport.

Water conservation – water saved by

operating our own water licence.

Energy efficiency within our buildings,

kitchen and equipment. Review and

investment.

Promoting employee awareness

through ourcampaigns ‘Going Green’

and ‘Wise up to Waste’.

Guest insight tracking our consumer

preferences regarding their choices, price

sensitivity versus climate change impact.

Technology opportunities – investigation

and implementation of new catering

equipment and building materials and

specifications to reduce emissions.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

Environment - TCFD report

This report has followed the guidance set out in Recommendations of the Task Force

onClimate-related Financial Disclosures (June 2017) available at www.fsb-tcfd.org.

At the time of publication, we have made climate-related financial disclosures consistent with

the TCFD recommendations in our TCFD report against:

• Governance (all recommended disclosures).

• Risk management (all recommended disclosures).

• Strategy (disclosure (a)).

• Metrics and targets (disclosure (a)).

For strategy disclosure (a), further work is underway to enhance the identification, impact and

reporting for climate-related risks and opportunities, and how these risks map over the short,

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.

Theme TCFD recommended disclosure 2022 Our disclosure

TCFD Report

pages

Governance

a. Describe the Board’s oversight of climate-related risks

andopportunities

The Board is responsible for the strategic direction of the Group, including

climate-related risks and opportunities.

PAGE 6

b. Describe management’s role in assessing and

managing climate-related risks and opportunities

The Executive Committee is responsible for ensuring that management

hastheappropriate resources in place in order to implement our business

strategy, including those aspects which connect to climate-related risks

andopportunities.

PAGE 7

Risk management

a. Describe the organisation’s processes for identifying

andassessing climate-related risks

The risk register for climate change is managed by the Director of Corporate

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.

PAGE 8

b. Describe the organisation’s processes for managing

climate-related risks

Marston’s has three strategic priorities, each of which are linked to the

effective control of climate-related risks and opportunities.

PAGE 10

c. Describe how processes for identifying, assessing, and

managing climate-related risks are integrated into the

organisation’s overall risk management

Environmental risks are assessed in terms of their potential to cause significant

impact on our business in either a short, medium or long-term timeframe. We

consider how the implementation of identified mitigating factors can support

our strategic resilience to climate change.

PAGES 10 –14

Recommendations we have made

significant progress against, and plan to

enhance our disclosure further. The

disclosures are not fully compliant with the

TCFD requirements.

Recommendations we have been able

to fully disclose against.

For metrics and targets (a), we are making progress with industry partners to calculate Scope 3

emissions within our supply chain and will include this data within our TCFD reporting when it

becomes available.

We have not included climate-related financial disclosures consistent with the TCFD

recommendations in relation to:

• Strategy (disclosure (b) – financial impact and disclosure (c) – scenario planning).

• Metrics and targets (disclosure (b) – Scope 3 emissions and disclosure (c) targets).

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. That work is underway and, as the availability of reliable data increases in

future years, we hope to further strengthen the level of compliance with the

recommendations.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

Environment - TCFD report

Theme TCFD recommended disclosure 2022 Our disclosure

TCFD Report

pages

Strategy

a. Describe the climate-related risks and opportunities

the organisation has identified over the short, medium,

and longterm

Risks registered, including business impact, mitigations and linked opportunities.

PAGES 10 –14

b. Describe the impact of climate-related risks and

opportunities on the organisation’s businesses,

strategy, andfinancial planning

The report shows the links between our three strategic priorities and the actions

we take for the sustainable management of procurement, food, waste, general

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.

PAGES 10 –14

c. Describe the resilience of the organisation’s strategy,

taking into consideration different climate-related

scenarios, including a +2°C or lower scenario

The modelling which is most pertinent to our business is for flooding within the UK.

Environmental predictions about climate change within the UK up to global

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.

PAGE 15

Metrics and targets

a. Disclose the metrics used by the organisation to assess

climate-related risks and opportunities in line with its

strategy and risk management process

Marston’s employs the services of an energy bureau (ISTA) to identify our

monthly energy usage per site and calculate the total Scope 1 & 2 emissions

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.

PAGE 17

b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3

greenhouse gas (GHG) emissions, and the related risks

Marston’s provides a full disclosure of Scope 1 & 2 risks. For Scope 3 emissions,

we are making progress with industry partners to calculate these emissions,

and collect the data as it becomes available from suppliers.

PAGE 17

c. Describe the targets used by the organisation to

manage climate-related risks and opportunities and

performance against targets

Our target is our Net Zero plan and our move towards the electrification of the

estate. The financial impact of climate change and Net Zero cannot presently

be quantified. We hope to provide this in future years as the costs and

opportunities become more certain.

PAGE 18

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

People

Our people at

the heart of our

business

Our vision is ‘Pubs to be proud of’ and we recognise

that we need engaged and motivated people to

help us achieve our vision and strategic objectives.

READ CASE STUDIES ONLINE

Employee

engagement score

7.8

Employee engagement

participation for 2022

75%

Our people are at the heart of our business

and we have a responsibility to support and

develop them to reach their potential. Effective

two-way communication is also critical: to

simultaneously inform and listen, to continually

drive both understanding and engagement.

Our people strategy aligns to our corporate

strategy and purpose, ensuring we remain

focused on the people priorities that support

and deliver our strategic objectives.

Our people strategy

The objective of our people strategy is to

engage and enable our teams to deliver

agreat guest experience, supporting the

business on its journey to ‘Pubs to be proud of’.

Wherever possible, the initiatives delivered

through our people strategy are aligned with

our strategic objectives.

1. We are guest obsessed

To deliver a great guest experience, the critical

success factors are attracting and retaining the

best people and ensuring that our teams are

trained to deliver a consistently great guest

journey. We use innovative platforms such as

Attensi, which delivers training through

gamification, ensuring it is fun as well

asinformative.

2. We raise the bar

We continually strive for improvement through

training and development. This year we have

continued with our Leadership programme,

which our general managers have engaged

enthusiastically with, allowing us to identify

and support talent. We have also invested in

the development of the Leadership Group

ensuring that we have highly skilled and

empowered senior leaders committed to

raising the bar at every opportunity.

3. We will grow

Our vision is to be an ‘employer of choice’,

with a rich and diverse mix of people who

reflect the society and communities in which

we work and serve. Our ‘People Promise’ was

launched in November 2022 and this is a

huge part of how we intend to bring our

vision to life.

This year we have continued to work hard on

further embedding our people strategy,

focusing on the follow areas.

Areas of focus this year

Resourcing

Following the appointment of a new Director

of Talent Acquisition and Employer Brand, we

have introduced several innovative initiatives

to improve our recruitment programme,

including an app-based recruitment platform

facilitating shorter hiring timelines and

reaching a wider pool of talent. We have also

improved our digital communication strategy

to ensure we are leveraging all social media

channels in our search for the best talent.

Reward

We recognise that economically we need to

ensure we are offering attractive rates of pay

relative to other sectors, in order to attract

and retain the best talent. In March 2022 we

increased the minimum hourly wage rates in

the business, ahead of the national minimum

wage rates for all age groups. We view this as

a key investment in our people that will help

improve standards and limit churn rates.

Weare also making a one-off cost-of-living

supplement to our lowest paid salaried

employees, to help support them financially.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

This year, we launched the ‘800-Club’.

Thisfinancially rewards and recognises our

general managers and Pub Partners who are

consistently raising the bar by achieving a

Reputation score of at least 800 and an EHO

score of 5*.

Training and development

We have relaunched our Performance,

Career & Development Review process

(PCDR). PCDRs provide a framework for

regular one-to-one and quarterly reviews

andare now hosted on Marston’s Campus;

our digital learning platform. This refreshed

process has enabled a greater focus on

employee development, career progression

and wellbeing. It also supports our teams to

be present and passionate about their career

journeys whilst being aligned to our behaviour

framework and strategic objectives as both

are signposted throughout the PCDR form.

People Promise

We have also been working on our employer

brand; our ‘People Promise’ launched in

November 2022. This is the articulation of our

people offer: the give and the get of working

for Marston’s. Building engagement internally,

and our reputation externally, our People

Promise will be used as a narrative and

wayofcommunicating with our employees

and candidates alike. It was developed by

engaging with employees at all levels across

Marston’s and it encompasses everything

wedo to position ourselves as an employer

ofchoice and what sets us apart from

ourcompetitors.

Communications

Our internal communication strategy is

focused on four key priorities: to inform, to

inspire, to engage and to enable. This year we

have invested in the way we communicate

with our employees and have carefully

designed or redefined communication

channels to provide our people with the

information they need, in the format that is

right for them, enabling them to provide

greatservice – whatever their role. Great

communication also helps to build an

inclusive culture where people feel welcome.

How we treat each other, and our guests,

should reflect the caring culture and values

that define our business.

Apprenticeships

The number of apprentices in learning is

continuing to rise across our pubs, bars, and

pub support centre – from 140 in August 2021

we now have 326 apprentices. This is driven

by the improved awareness throughout the

business, supported by the PCDR process

anda desire to use on the job training as

apipeline for new talent, or to develop

existing employees through accreditation

orMBA programmes.

We introduced our Marston’s Chef Academy

in May 2022, partnering with Lifetime Training.

Through a series of masterclass workshops

and enrichment days we are offering new

and existing kitchen team members the

opportunity to develop their practical

cooking skills and acquire new knowledge.

Employee engagement

Employee engagement remains one of

ourKPIs and also forms part of our bonus

structure. We want our people to be engaged

in their work, supportive of our vision and feel

motivated to achieve our strategic objectives.

To this end, we have continued with our

monthly ‘Your Voice’ surveys, delivered by

Peakon and now available to all employees

and our Pub Partners. The surveys are

delivered digitally, completely confidential,

and provide managers with actionable

insights and suggested action plans through

an integrated dashboard. Some tangible

actions we took this year as a result of

feedback received through Peakon include:

• Enhanced our employee benefits,

including deeper employee discounts in

our pubs to support our new menu launch.

• Improved communication channels,

particularly for the communication of

ourstrategy and performance against

ourKPIs.

• Increased mileage rates to respond to the

rising fuel prices.

• Prioritised financial wellbeing through

education tools and financial support

such as the cost-of-living supplement and

national living wage increase.

• Worked with managers to ensure that they

understood the link between engagement

and performance and provided training

on the Peakon system to ensure that

action plans were implemented.

We continue to see stronger interest in

professional development from our front

ofhouse teams too, with 61% versus 39% last

year in chef apprenticeships. Participation

inleadership apprenticeships (level 3 and

above) has continued to increase from 35%

of all apprenticeships in August 2021 to 47%.

As part of our commitment to raise

awareness of apprenticeships, Marston’s is an

award category sponsor for ‘Ladder for the

Black Country Apprenticeship Awards’ in

conjunction with Wolverhampton Council

and the Express & Star newspaper.

School engagement

During 2022 we continued our collaboration

with ‘Loving Hospitality’ engaging with students

aged 14–16 at National Apprenticeship Shows

in Sandown, Milton Keynes, Exeter, Manchester,

Harrogate, Bristol, and Coventry, to showcase

the career opportunities available within

hospitality. Wehave been able to reintroduce

our ‘Take5’ work experience programme,

supporting 20 student placements during

the2022 Spring/Summer term.

RESPONSIBLE BUSINESS CONTINUED

People

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

People

Our Pub

Partners and

their businesses

Our Pub Partners are an integral part of our business and

influence the character and diverse mix of our pub estate.

Werecognise that our Partners’ commitment to their

businesses is what determines their success. The owner/

entrepreneur mentality of a franchisee-style agreement

helpsto drive sales.

READ CASE STUDIES ONLINE

Our Pub Partners now have the use of

Reputation, for guest insight and Peakon,

for employee engagement

Whilst trading conditions have been

challenging this year, particularly in the first

half owing to the emergence of the Omicron

variant, we have continued to support our

Partners to help make their businesses a

success. This included additional support for

our Partners in Wales, whilst they were subject

to extended periods of lockdown, and local

support on a pub-by-pub basis supported by

committed and passionate business

development managers.

We currently offer a range of agreements to

suit our Partners, from Retail, Foundation and

a tenancy agreement. In 2021, we introduced

our Pillar Agreement, a new style of turnover-

share agreement which allows our Partners

tohave the freedom to implement their own

food offer, but still benefit from all of the

positive elements of a franchise model,

including Marston’s drink expertise and cost

efficiencies. Our Partners are free to innovate

and their passion creates unique pubs which

are often at the very heart of the communities

they serve. We currently have 64 pubs

operating under Pillar and we are trialling the

model in 4 food-led pubs that were formerly

part of our managed estate.

With our expertise and purchasing power,

weare able to provide a package of support

and development tools to our Pub Partners.

Every Partner receives complimentary access

to Marston’s Campus, our training and

development platform, which includes a

plethora of e-learning courses, webinars and

help with apprenticeships. We also support

with training record cards for the Pub

Partners’ employees, providing support for

EHO and licencing compliance, and

applying for a personal licence to retail

alcohol via the British Institute of Innkeeping.

FOR MORE INFORMATION ON THE TYPES OF

AGREEMENTS WE OFFER, SEE OUR WEBSITE:

WWW.RUNAMARSTONSPUB.CO.UK

This year we have also offered our Pub

Partners access to Reputation. This enables

our Partners to gain the same guest insight

that has been transformational for Marston’s

and provides a platform for them to listen to,

and communicate with, their guests as well

as refine the guest experience using

actionable insights.

We are committed to engaging with our

PubPartners and have invited them to

participate in the Peakon engagement

surveys. This provided a platform for Pub

Partners to share their views on a confidential

basis and help shape their experience at

Marston’s. Like our employees, Pub Partners

have their own Peakon app, with a personal

dashboard to access their own feedback,

and Business Development Managers can

acknowledge and respond to comments as

well as develop action plans to address the

issues that matter to our Partners the most.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

What attracted me to

Marston’s Pillar Partnership

was the ability to still manage

and operate my business

how I wanted, but I have

support from Marston’s for

maintenance so a lot of stress

in regards to certain bills and

overheads are gone. I’m still

in control, I can still create my

own menu and I am using all

local suppliers, but I have the

support and the backing from

the pub company.

NICKY M AYHO

ROSE COTTAGE, OLLERTON

Our Partner Strategy

1. Choice/flexibility

The key to success is matching the right pub

and the right person to the right agreement.

We take time to understand the applicants for

our pubs; ranging from seasoned licensees

with many years of experience, to those who

have never run a pub before but have a

burning ambition and the right mindset to do

so. We offer a diverse range of opportunities

and the type of agreement offered reflects

the experience, confidence and ambition of

the applicant.

If we think that an applicant is unsuitable

weare honest about that from the outset,

recognising that mutual success can only

beachieved in a genuine partnership

arrangement.

2. Training

Our Partners are provided with a detailed

induction and support to open their

business,together with ongoing training and

development opportunities through Marston’s

Campus or on a one-to-one basis, depending

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.

RESPONSIBLE BUSINESS CONTINUED

People

Our Partners also benefit from the range

ofexperience held by our experienced

management team including our Regional

and Area Managers.

4. Drinks agreement

At Marston’s we understand the important

part we play in providing a comprehensive

range of quality drinks. Our drinks strategy

isreviewed regularly to ensure we remain

competitive and offer a portfolio which

meets with an ever-changing consumer

demand. The different types of agreements

offer varying degrees of a drinks-tie, but our

experience and guest insight helps ensure

that all our Pub Partners have access to a

range which supports them to serve their

guests with the drinks they know and love.

5. Investment

We have the utmost pride in our pub estate,

recognising that the character of these

buildings is a vital part of the appeal to our

guests. It is also one of our drivers for organic

growth. Our ‘Make Capex Great’ plans on

page 16 includes our Partner Pubs and, at a

more local level, our estates management

helpdesk is always available to support our

Pub Partners with maintenance issues,

ensuring their pub is safe and inviting for

guests. Some of our partnership agreements

will see us taking care of all repairs, while

others share responsibility with the

PubPartner.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RESPONSIBLE BUSINESS CONTINUED

Community

Where local groups exist, our pubs are encouraged to engage

withthe following community initiatives; please visit the links below:

Best Bar None: www.bbnuk.com

National Pubwatch: www.nationalpubwatch.org.uk

Purple Flag: www.nbcc.police.uk/guidance/purple-flag-scheme

As part of the evolution of our pub estate,

wehave categorised all of our pubs into one

of three core formats: Community, Signature

or Revere. This simplification of our estate

enables us to clearly define, and respond to,

what the local guest and their community

value most.

This year we have refined our social purpose

agenda under ‘Doing more to be proud of’,

and strong social and charitable partnerships

will be a key focus for the year ahead under

the stewardship of our Director of Talent

Acquisition and Employer Brand. Our pubs

continue to support their local communities

and charities and we support and

encourage them to do so.

In May this year, a number of our employees

took part in a sponsored skydive raising over

£13,000 for The Burnt Chef Project, a not-for-

profit organisation that is committed to

raising awareness of, and providing support

for, mental health issues within hospitality

across the world. More information on the

Burnt Chef project can be found on page 14,

including how we have partnered with Burnt

Chef to provide training on mental health in

the workplace.

Our Pitcher & Piano team in Hitchin won

ourinternal Pride Month competition and

they were able to nominate a charity for

a£250 donation from Marston’s Charitable

Foundation. The money was donated to

MindOut, a mental health charity for the

LGBTQ+ community and this helped pay

for25 counselling sessions.

Two members of the team from Willows in

Blackburn walked from the west coast of

England to the east in just five days. They

raised over £3,000 for Derian House, a local

Children’s Hospice that provides respite and

end-of-life care to more than 450 children

and young people across the North East.

Social purpose

We engaged with our employees

aboutwhich national charity partner

theywould liketo see us partner with,

ultimately choosing the Trussell Trust. They

provide a nationwide network of food banks

and emergency food and support. We are

inthe process of finalising how we can help

support the Trussell Trust through corporate

partnership and contribute to ending food

poverty. We are also trailing Too Good

toGoin 6 of our carvery sites. Other key

partnerships include our support ofthe Burnt

Chef Project and the Latitude programme

and more information can be found on our

website: www.marstonspubs.co.uk.

Marston’s Charitable Foundation

Marston’s Charitable Foundation re-

launched this year. This scheme enables our

employees to donate directly from their pay,

to support causes close to the hearts of our

pubs and their local communities. We are

encouraging as many people as possible to

contribute so we can complement other

fundraising and help ensure that smaller,

local charities and causes have access to

support, particularly during the tough

economic climate.

Our pubs are at

the heart of their

communities

Our pubs are highly valued by the communities which

theyserve. We believe that strong local relationships and

understanding what is important to the local guest is essential

for the long-term success of our pubs; irrespective of the

operating model.

READ CASE STUDIES ONLINE

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Improvement in Reputation score

since new menu launch in April 2022

Our guest strategy

As with all other areas of our business,

wherever possible, all initiatives are aligned

with our strategic objectives:

We are guest obsessed – using insight led

data to dynamically respond to feedback at

pace, aiming to improve the quality of our

guest journey and overall experience.

We raise the bar – we constantly seek to

improve guest satisfaction; whether through

improved speed of service from reducing

operational complexity, or ensuring we follow

safe and ethical standards.

We will grow – aimed at improving our

margin and increasing our market share.

Wecontinue to work on category plans

toimprove our offer, additional revenue

opportunities and more disciplined pub

investment decisions.

Food and drink development

Our food and drink menus have been

reviewed and streamlined during the year.

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.

Furthermore, we have transformed our

menusacross all the digital platforms. Menu

information is provided to our guests in a clear

and engaging way and we have worked with

Ten Kites Nutritics to improve the way we

display allergen and calorie information

onour menus, allowing our guests to make

informed choices more easily. Our menus are

now fully integrated with our websites and can

be filtered based on guest preference,

allergens or lifestyle choices such as

vegetarian or vegan dishes.

We continue to invest in systems and work

practices that provide accurate information

on allergens and nutritional content. From

our suppliers through to our kitchens, and to

the information provided to our guests, we

have worked to enhance the flow of this

data to increase its reliability and ease of

delivery. The system also helps us to monitor

criteria important to us as a responsible

retailer under our ‘Doing more to be proud

of’ initiative, including ensuring that our

suppliers implement responsible procurement

practices and comply with our Food Charter.

RESPONSIBLE BUSINESS CONTINUED

Community

Offering great

quality experiences

for our guests is our

top priority

We constantly strive to create happy, meaningful, memorable

experiences. Providing good food and drink is at the heart of

our business. Keeping that offering special and innovative is

what our guests love.

READ CASE STUDIES ONLINE

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Areas of focus this year

• Implementation of calorie labelling

onmenus (launched in April this year).

• Compliance with Natasha’s Law

whichintroduced mandatory allergen

information on pre-packed food

preparedon site, including support

forourPub Partners.

• We continue to make progress with our

salt reduction targets set by the Office for

Health Improvement and Disparities when

creating new menu items. We are working

towards the 2024 targets on all our items

and, based on our previous work in this

area, we are in a good position to

achievethese.

• We are continuing to commit to

redeveloping all own brand products

where egg is used as an ingredient, to be

cage free by the end of 2025. All shell

eggs in our supply chain have been

cagefree since early 2019.

Progress against key targets

Reputation score

Reputation generates an aggregate score

for our pubs based on numerous factors, such

as Google ratings and feedback on social

media. This platform is loved by our teams for

its simplicity and the impact it can have in

understanding their local guest preferences

and concerns, and providing actionable

insights. Our score has increased by 100 since

its introduction, but we see an opportunity to

further improve this score and it remains one

of our KPIs for this reason.

Allergens

Allergens training is mandatory and

thisreinforces how highly we value the

importance of equipping our teams with

theright knowledge, and responding to the

needs of our guests. We have also launched

an allergy auditing programme, which

involves mystery guest visits.

RESPONSIBLE BUSINESS CONTINUED

Community

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Suppliers onboarded on SEDEX

We have worked with our suppliers to help

reduce these exposures and to try and

findsolutions.

Despite the adversities and uncertainties in

the current market, on the whole, we have

been successful with our core food suppliers

in negotiating and renewing our key

contracts. This has demonstrated the

commitment of our trusted suppliers to work

through the wider issues currently impacting

upon the economy, and we thank them for

their ongoing support.

Our supplier and procurement

strategy

Our procurement strategy is built on

relationships which create sustainable

profitability for both ourselves and our

suppliers. Our supplier selection and tender

process is designed to ensure that we identify

key commercial/legal risks at the outset and

sufficient information is shared by both

parties. Material tenders are managed by

dedicated procurement specialists and

supported by subject matter experts, where

appropriate. Where possible, we involve our

suppliers in our business plans, building

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.

We seek suppliers who reflect our own

corporate values, which is demonstrated

during the selection process and supported

by accreditations and the use of SEDEX.

Food Supplier Charter

Our guests have a right to expect a high level

of diligence in the sourcing of goods, products

and services. With regard to food supplies, our

food charter sets out our expectations on

quality of product, traceability of ingredients,

ethical approach, sustainable sourcing and

associated labour practices. The Charter also

conveys our expectations for suppliers to

reduce their own environmental impact by

minimising unnecessary packaging and

choosing recyclable materials, wherever

possible. This forms part of the contractual

commitment when onboarding a new supplier.

The Charter is reviewed each year and

updated as necessary and includes the

Office for Health Improvement and Disparities

2024 salt targets and calorie targets. Our

suppliers work with us to achieve these targets,

particularly when new items are launched.

Inthe coming year, we expect to be able to

launch a Drinks Supplier Charter in the

samevein.

RESPONSIBLE BUSINESS CONTINUED

Community

Our supplier

relationships are

fundamental to

long-term success

The pressure on our supply chains has continued this year as

we all manage global and domestic issues, such as price rises,

labour shortages and rising commodity and energy costs.

READ CASE STUDIES ONLINE

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Impact of border controls

The UK Government has delayed the border

checks on all goods coming from the EU until

the end of 2023. The imposition of border

controls risks creating delays on the

importation of fresh food and meat from

Europe. The revised timetable has arguably

reduced the strain on food imports and

allowed more time for the UK Government to

ensure that the necessary infrastructure and

resource is in place.

Ethical sourcing

Our preference is to select suppliers who share

our ethical values on matters such as the

environment, employment rights, equality,

inclusivity, modern slavery and safety.

We are full members of SEDEX, which is a

platform used by many companies to share

information on ethical trading, including

labour practices. We are working with our

existing suppliers to ensure that they register

with, and provide the necessary information

to, SEDEX to enable us to further improve the

visibility and reliability of our supply chain.

Our drinks supplier: Carlsberg Marston’s

Brewing Company (CMBC)

Since October 2020, CMBC has been our

exclusive distributor of drink products and

CMBC has worked with us to meet the

challenges in sourcing the global drink brands

enjoyed by our guests.

In 2022 CMBC aimed to source 100% of its

energy from renewable sources, reduce

emissions from breweries by 50%, and reduce

emissions within its own operations and from its

suppliers by 15%. CMBC is working towards

zero carbon emissions from its breweries by

2030, and a 30% decrease in emissions across

their supply chain.

Modern slavery

Our full Modern Slavery Statement is

available at www.marstonspubs.co.uk.

Theinformation shared by suppliers on SEDEX

includes how they are responding to the risk

of modern slavery, allowing us to follow up

any issues raised.

RESPONSIBLE BUSINESS CONTINUED

Community

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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

plans and our commitment to being a sustainable business.

TCFD report

Responsible Business

Environmental

PAGES 29–31 (EXECUTIVE SUMMARY)

PAGES 24 – 40

PAGES 26–31

www.marstonspubs.co.uk

Our people

• Marston’s policies are shared with all our employees on our Company

intranet ‘the Hub’ and website; many of which can be viewed publicly.

• The health and safety of our people and our guests is of paramount

importance to us.

• Our ‘Speak Up’ Policy and activities are overseen by the Board and

undergo annual review and campaigns to raise awareness amongst

ourpeople.

• Corporate hospitality – Rules to be followed by all employees governing

the acceptance of gifts or hospitality, the approval process and reporting.

• Competition law – Outlines Marston’s overarching commitment

andpractices to comply with the relevant legislation on competition

lawmatters.

Our people

Health and Safety Policy

‘Speak Up’ Whistleblowing Policy

Corporate Hospitality and Gift Policy

Data Protection Policy

Equal Opportunities Policy

Equality, Diversity and Inclusion Policy

Food Safety Policy

Fraud Policy

Group Purchasing Policy

PAGES 32–33

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

and Wales and their tenants. Information from the Pubs Code Adjudicator can be found at: www.gov.uk

• Food Supplier Charter – A combination of training, compliance testing, internal and external auditing and assurance

gathering contributes to the due diligence of the policies that support our approach to the five key non-financial matters.

• Food information system – Food ingredient information collected from our suppliers used to formulate our dishes, identify

allergens and communicate food constituents to our guests.

Audit Committee Report

PAGES 69–71

www.marstonspubs.co.uk

PAGE 37– 38

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

NON-FINANCIAL INFORMATION STATEMENT CONTINUED

Reporting

requirement Our approach Supporting information Where to find it

Anti-bribery and

corruption

Our Anti-bribery and Corruption Policy sets out our commitment to

conducting our business operations in a fair and ethical manner and our zero

tolerance approach to any form of bribery or corruption from our people,

suppliers or any third parties.

Anti-bribery and Corruption Policy

Anti-money Laundering Policy

www.marstonspubs.co.uk

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

• KPIs

• 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.

PAGE 7

PAGE 9

PAGES 43 – 52

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RISK AND RISK MANAGEMENT

Managing uncertainty and new opportunities

The pandemic at the start of the financial year

continued to influence trade in the hospitality

sector. Our trading environment in that period

was caught between a confluence of

challenges; supply chains globally were still

being impacted, risking shortages of products.

For our pub teams, we experienced a higher

number of team absences due to COVID-19.

Recruitment has been ever more challenging

as the labour market has tightened. As a result,

the pre-Christmas period – which is normally a

buoyant time for trade – was distinctly muted

by people’s nervousness about meeting in

groups before the holidays.

In order to protect the liquidity of the

business, Marston’s has cut costs, reduced

capex and secured temporary waivers from

our bondholders to breach covenants. This

has allowed the business to manage its

financial risks and operate well within its

financial cash headroom. The business

focused on prudent cash management and

the continued organisation of the business

into a pure pub operator.

At the beginning of the year our IT network

was still running many of the core processes

for CMBC, such as the sales order process

andpayroll. This was always planned to be

ashort-term measure to minimise any risk of

disruption or loss of data from the separation

of our businesses. During the year, our IT

network was separated completely from

CMBC. This required careful project

management and control of risk to

ensurethat both businesses’ operations

wereunaffected by the transition.

The continuous operation of our supply chain

was at a higher level of risk during the year.

Whilst the economy adjusted following

thepandemic, the global demand for

commodities, technology and energy

intensified as demand in many areas out-

stripped supply. Our food supplies, in particular

those from overseas, require unimpeded

routes of transport in order to remain fresh.

However, the delivery of goods to our pubs has

remained strong despite these challenges.

The new risk environment and the changing

dynamic of our guests, together with a

resurgent demand amongst people to

meetand enjoy pubs, created a unique

opportunity for us to re-evaluate our place

inthe market. We realigned the management

ofour estate and relaunched our offering,

incollaboration with our suppliers. This

opportunity has allowed us to understand our

guests in more depth and thereby identify the

commercial opportunities across our estate,

byadapting the pub format to closely match

local demand. The opportunity allowed us

tocompletely relaunch our menu in time for

Easter, stripping out what was less important to

our guests and ensuring that the items which

mattered the most were best in class.

Risk management at Marston’s

The Board and Audit Committee recognise

theimportance of sound risk management

inorder to achieve our strategic objectives.

We continually assess the threats and

opportunities and design our risk

management processes so they are integral

toourbusiness and fit to meet the changes

inthisoperating environment. The trading

environment in which our business operates

changed as a result of the pandemic. These

changes have been compounded by other

global, economic and geopolitical factors

including: inflation, energy prices, labour

shortages, global demand, andrecession.

External factors will always change the risks

faced by our business, many of which, such

aspandemic, are unavoidable and must be

robustly mitigated if our strategic objectives

are to be met. Our risk management

processes aim to anticipate risks before they

impact upon our activities, to ensure that we

are in the best place to mitigate them and

recognise the opportunities they bring in a

competitive marketplace. Our guests have a

high expectation that our business operates in

a safe manner, upholding the high quality of

the drink and food sold and our reputation for

excellent service.

Risk management is primarily aimed at the

control of uncertainty. For all our key risks, we

identify the key mitigating controls and their

ownership. Our assurance activities are

focused upon those key risks so that we

continually understand the strength of our

controls. Maintaining a strong relationship with

our guests is implicit to our success. Our guest

surveys provide essential information about

our levels of service. We manage the risk to

reputation by using Reputation.com to collect

social media scores across all our managed

and retail sites. The scores help us to direct

focus on those sites where improvements will

matter the most.

We build resilience into our supply chain while

recognising the commercial importance of

taking risks within an acceptable tolerance.

We invest in our IT network to ensure there is

enough capacity and resilience to mitigate

the threat of disruption. We actively consider

and rehearse unexpected scenarios which

could impact upon us at short notice.

This in turn informs the practices and policies

which we follow, and the emergency plans

we adopt. Our people strategy and

behaviour framework is aligned with our

corporate policies to articulate what the

business expects of our employees.

Our appetite for risk

Marston’s is open to taking risks,

providing those risks align with, and help

us to achieve, our strategic objectives in

a responsible way and within agreed

parameters. Marston’s will, wherever

possible, remove those risks completely

that pose a threat to achieving the

strategic objectives. If avoidance is

impossible, Marston’s will seek to mitigate

risk by investing in effective controls or by

sharing risks with a third party. These

controls are managed and monitored

togive assurance that the risk level is in

accordance with the parameters set

bythe Executive Committee. It is our

understanding that our overriding

principle of care for our stakeholders,

ourcommunities, and the environment

isa priority for our strategic objectives.

We continually review risk to ensure we

guard against any threats to health,

hygiene or safety.

This statement represents the Board’s

appetite for the level of risk which it is

prepared to accept to achieve its business

strategy. The Board proactively seeks to

understand the risks faced, and a shared

understanding of the risk management

practices operated and their degree

ofeffectiveness.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RISK AND RISK MANAGEMENT CONTINUED

Managing uncertainty and new opportunities

Current key risk drivers

A. Pandemic

The risk posed by COVID-19 has receded since

last year. There remains a risk that new waves

of infection, or new variants of the virus, might

influence our guests’ visits or Government

policy if the NHS comes under further strain.

Additionally, there remains the risk in the future

that a new form of pandemic could impact

upon our trade. While this risk is small, because

it uniquely has the possibility of closing our

pubs, it is necessary for us to continually review

our resilience to such a crisis.

B. Liquidity

The disruption to trade caused by the

pandemic and the consequential impact

onprofitability could affect the Group’s ability

to gain additional financial backing. The

Group secured waivers from its banks and

bondholders recognising the exceptional

nature of these circumstances. The Group

hasa stated aim to reduce debt which

willinturn mitigate liquidity risk. Since the

tradingrestrictions on pubs were lifted last

year the demand for our pubs and room

accommodation has rebounded,

demonstrating our long-term viability.

Amaterial uncertainty over going concern

has been disclosed in the financial statements

as we expect to seek further covenant

amendments before 31 December 2022.

C. Health and safety, and food safety

The safety of our guests and our people is a

priority for our business. Our team of safety

specialists work with our operational teams in

order to advise on safety, risk assess, formulate

policy, investigate accidents and track the

safety scores for each site. Sites are regularly

externally audited and the results acted upon

by management. Managers’ bonuses are

impacted by the safety scores. Our sites’

safety scores have improved during the year

by instilling a safety culture. Food safety has

been improved by the development of our

food information system, allowing for a more

accurate flow of information about the

ingredients in dishes from our suppliers

toourguests.

D. Operational risk: supply chain

During the year, our industry has experienced

disruption to its supplies of some food and

drink items. We have worked with our

suppliers to identify problems early so that

substitute items can be arranged that have

not diminished our guests’ enjoyment. The

Government has further delayed the full

border checking of goods coming from the

EU in order to ease the pressure on supplies

already stretched.

E. Operational risk: recruitment and

retention

Since the pandemic there has been an

increased number of vacancies within

thehospitality sector. Recruitment remains

challenging. To mitigate this, the business has

reviewed its competitiveness at recruiting

thebest people. We actively manage the

engagement of our people, surveying and

reporting back to our teams the steps taken

to address their concerns and listening to

their suggestions. We act to keep pay

andrewards competitive and respond

quickly when issues regarding retention

areidentified.

F. Energy/TCFD

The volatile energy market this year has

impacted upon the prices that we can lock

gas and electricity into. Furthermore the

energy market could contribute to the

economy going into recession. Our energy

contracts bring some certainty to the cost of

energy in the year ahead for our managed

and retail pubs. However, our Pub Partners’

businesses are individually exposed to the

movement in prices depending upontheir

own contracts. Climate change will impact

upon future energy costs and theinvestment

necessary to decarbonise ourbusiness.

Therisks and opportunities associated

withclimate change for our business are

setout, this year, in our first TCFD report,

which is available to download from

www.marstonspubs.co.uk.

Principal risks

The risks are plotted on the matrix according to impact and likelihood.

The placing of the risk reflects the position after the mitigation by controls.

1. Market and operational

2. Pandemic

3. Liquidity

4. Health and safety, food safety

5. Financial covenants and accounting controls

6. Political/economic

7. Information technology

8. Energy

Impact

Likelihood

Increasing

Reducing

Less movement

Key:

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Risk Description Potential impact Mitigation

1. MARKET AND

OPERATIONAL

LINK TO STRATEGY

During the current cost of living crisis, including high inflation and

consumer price sensitivity, there is an increased risk that our prices

become uncompetitive. Inflationary pressure on costs might be

difficult to pass on, resulting in reduced margin.

Marston’s revenue is dependent upon being able to offer, and

attract, our guests to an enjoyable experience of high quality food

and drink at the right price. It is reliant upon attracting existing

guests back and winning new guests. To achieve this we compete

for high calibre people to operate our pubs and focus heavily upon

their training and management. We carefully choose our suppliers

and the food and drink offered to our guests. Uninterrupted

operations are dependent on the continual supply of goods and

services, often from single sources. The operational performance

ofour suppliers is materially significant to our total profit.

Failure to attract or retain the best people can impactour pubs’

performance. Recruitment is more competitive due to a tightening

labour market and wage inflation. Disruption to key suppliers,

particularly those closely involved with our day-to-day activities

orshortage of commodities could significantly impact our

operations. Disruption to food supplies from the EU due to

administration, or customs checks, could impact upon our offering

to guests if we were unable to find substitutions. These factors

could mean over time that our pubs fail to attract guests, or do

notreflect changing preferences, or offer poor service or quality.

• Reduction in the number of sales or

lost opportunities to increase our

value proposition

• Reduction in guest satisfaction

levels and repeat visits to our pubs

• Increased costs as a result of

seeking alternative suppliers

• Continual assessment of guest preferences; market and

consumer insight data

• Continual analysis of sales performance data of single sites

and by pub format

• Pricing strategy built upon careful analysis, in sufficient

detail, of guests’ sensitivities

• Marketing, including digital marketing campaigns

• Tracking guest feedback on Reputation.com and targeting

our sites with improvement

• Cost control, including menu margin analysis

• Investment, location and design of our pubs

• Continual awareness of our people offer compared to our

competitors through participation in appropriate networks

• Improved training, induction and development

programmes

• Tracking the engagement of our employees and

identifying action points for teams

• Continual assessment of suppliers’ resilience and capacity

• Contingency planning with suppliers: identifying how

products or services can be substituted

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.

RISK AND RISK MANAGEMENT CONTINUED

Our principal risks and uncertainties

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.

This is not intended to be a complete assessment of all risks as the Group risks change over time.

Risk movement key:

Increased Decreased No change

Linked opportunity key:

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Risk Description Potential impact Mitigation

2. PANDEMIC

LINK TO STRATEGY

COVID-19 demonstrated how a global pandemic

canimpact our industry and public life. One would

anticipate that at some point in the future another

pandemic will occur. The severity of a future pandemic

upon human health and the duration of measures taken

to reduce the infection rate are uncertain.

There is a risk that a variant of COVID-19 or another form

of pandemic causes infection rates to increase, leading

to future restrictions on the public and trading

regulations imposed on pubs and lodges.

• Ability of our teams to operate safely

• Reduction to the numbers of guests,

and shorter stays at our hotels

• Increased operating costs

• Remaining alert to Government advice

• Auditing our readiness to implement a response effectively

• Adaption of our pubs to facilitate social distancing

whenrequired

• Training available for our pub teams

• Building contingency plans for future lockdowns

• Consulting with our employees during an outbreak on safety

concerns and operational issues

• 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.

RISK AND RISK MANAGEMENT CONTINUED

Our principal risks and uncertainties

Risk movement key:

Increased Decreased No change

Linked opportunity key:

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Risk Description Potential impact Mitigation

3. LIQUIDITY

LINK TO STRATEGY

Our financial strategy is to reduce our debt below

£1billion. The UK economy is likely to go into recession

as a result of high inflation, rising interest rates, rising

costs in energy and a fall in consumer confidence.

Consumers will reduce spending as the economy goes

into recession and as prices rise. The cost of living crisis

created uncertainty regarding consumer behaviour.

While in previous recessions pubs have remained

attractive and affordable, this might not always be

thecase.

The liquidity of the business could come

under strain as a result of economic

pressure on the pub sector, particularly

ifrising prices cannot be passed on to

consumers.

• Seek further covenant amendments to avoid an expected

covenant breach at 31 December 2022

• Seek to increase the banking facility through an amend and

extend agreement

• Reduce debt

• Conserve liquid funds by reducing costs

• Maintain strong relationships with financial backers

• Lobby Government on the importance of the pub trade to the

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.

RISK AND RISK MANAGEMENT CONTINUED

Our principal risks and uncertainties

Risk movement key:

Increased Decreased No change

Linked opportunity key:

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Risk Description Potential impact Mitigation

4. HEALTH AND

SAFE TY, FOOD

SAFETY

LINK TO STRATEGY

The safety of our guests, our people and the public is

fundamental to our activities. We seek to attain the

highest levels of safety across our estate. Lapses of

safety damage the trust and reputation of the business.

The provision of accurate and reliable information on

food, to our guests, is paramount. Our guests trust in our

high standards of food hygiene, food preparation

andquality.

Breaches of health and safety regulations and food

standards attract media attention and high penalties.

Public concern over allergens still remains high. There is

a risk that information is collected incorrectly from our

suppliers and/or misinterpreted for our menu items.

There is also a risk if a team member mis-advises a guest

on ingredients or serves the wrong meal. Increased

regulation directly affecting Marston’s or our suppliers

could increase the complexity of the information to be

provided and the cost of compliance.

• Financial penalties

• Significant damage to reputation

• Increased business complexity

impacting upon our guests’

experience

• Embedded health, safety and hygiene management systems

• Dedicated safety advisers for our pubs seeking continuous

improvement

• Regular independent expert safety audits

• Training of team members including e-learning modules on

specific risks, such as allergens, for completion by all front and

back of house team members

• Escalation of potential safety threats to senior operational

management

• Maintaining excellent levels of compliance through policies,

training and monitoring

• Working with our supply chain to maintain accurate records

identifying the constituent food ingredients and allergens

ofourmeals

• Due diligence on accepting new suppliers, monitoring

andtracking all suppliers

• 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.

RISK AND RISK MANAGEMENT CONTINUED

Our principal risks and uncertainties

Risk movement key:

Increased Decreased No change

Linked opportunity key:

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Risk Description Potential impact Mitigation

5. FINANCIAL

COVENANTS,

PENSION FUND

DEFICIT, AND

ACCOUNTING

CONTROLS

LINK TO STRATEGY

The Group’s financial system handles many transactions

accurately and securely. Accurate reporting is key to

running the business effectively, and in compliance

withour financial covenants.

Breach of the covenants with our lenders.

Incorrect reporting of financial results.

The pension deficit might increase if investment

yieldsfall.

Unauthorised transactions, failure of accounting

controls or overridden.

Greater responsibility to report on control effectiveness

as a result of the Government’s white paper on ‘Restoring

Trust in Audit and Corporate Governance’.

• Reputation damage and additional

financial operating restrictions

imposed by lenders

• Loss of investor confidence

• Covenant waiver permission sought from bondholders/

financiallenders

• Regular detailed management accounts, budgets and forecasts

• Detailed financial data collected from our sites

• Financial auditing of our sites based on data analysis

• Constant monitoring of financial ratios

• Internal and external audits

• Segregation of duties

• Access controls within our systems

• Levels of authority

• Commitment to reduce debt

• 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.

RISK AND RISK MANAGEMENT CONTINUED

Our principal risks and uncertainties

Risk movement key:

Increased Decreased No change

Linked opportunity key:

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Risk Description Potential impact Mitigation

6. POLITICAL

AND ECONOM IC

LINK TO STRATEGY

Changes to Government policy impact upon the cost

base for operating pubs, either positively or negatively.

At the same time, economic factors such as the current

period of inflation and high demand for certain

commodities and products, also impacts our operating

costs and those of our supply chain. Legislative changes

also impact business, particularly in recent times the

move to decarbonise the economy. It remains uncertain

how successful the Government and the Bank of England

can be in curbing inflation pressure in the year ahead

and what the impact will be on consumer confidence.

There is a risk that inflation continues to rise, leading to

higher interest rates, increased unemployment, and low

consumer confidence. The UK as well as many other

countries is at a risk of a deep recession, exacerbated

by high energy costs and shortages of commodities.

• It may be harder to secure long-term

agreements with our suppliers while

prices rise and shortages of some

commodities or products exist

• To constantly review the positioning of our guest offer at the

rightprice point, to maintain or grow margin whilst remaining

competitive

• Continue to lobby Government on matters that are likely

torestrict trade or increase costs

• Continually assess our supply contracts and renegotiate terms

when they fall due

• Where feasible, work with our key suppliers to hold sufficient

stocks in the UK to cover short-term disruption

• Consider alternative sources of supply if our suppliers have

trouble importing goods

• Financial forecasts stress tested based on reduced revenue

asaresult of an erosion in consumer confidence

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.

RISK AND RISK MANAGEMENT CONTINUED

Our principal risks and uncertainties

Risk movement key:

Increased Decreased No change

Linked opportunity key:

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MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Risk Description Potential impact Mitigation

7. INFORMATION

TECHNOLOGY

LINK TO STRATEGY

Our business activity is reliant upon our IT network

tocommunicate, operate effectively, serve our

guests,process transactions and report on results. The

continuous operation of our business is dependent upon

the uninterrupted running of our computer network, site

links and the internet. The cyber threat has increased in

recent years targeting vulnerable businesses with data

theft, data encryption, denial of service and fraud.

Marston’s handles the personal contact details of many

of its guests who opt to use the Wi-Fi or sign up to

receive mails. In addition, the Group retains the

employment data for a large number of people.

Threats to IT are both external and internal and could

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.

• Reduction in the effectiveness of

operations, business interruption and

loss of profit

• Regulatory fines as a result of the loss

of data

• Reputational damage due to a loss

ofdata

• Anti-virus and firewall protection

• Access control, password protection and IT policy adherence

• Network and device controls and monitoring

• Penetration testing and remediation

• Cyber defence testing

• Backup procedures

• Data recovery plans and rehearsals

• Raising employee awareness regarding IT security

• Data security policies, processes and training

• Data breach incident response plan and scenario training

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.

RISK AND RISK MANAGEMENT CONTINUED

Our principal risks and uncertainties

Risk movement key:

Increased Decreased No change

Linked opportunity key:

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Risk Description Potential impact Mitigation

8. EN ERGY

LINK TO STRATEGY

This risk incorporates both energy price rises, and the

wider strategic approach to sourcing energy. Energy

prices have plateaued and more recently fallen. The

transition to Net Zero emissions is a challenge for our

business and those within our supply chain. The transition

could result in higher costs as a result of investment in new

technology, and from sourcing a higher proportion of

renewable energy.

Recent high energy costs have added to inflationary

pressure, a reduction of operating margins for many

businesses, increased Government borrowing and a

reduced disposable income. Contractual negotiations for

energy play a key role in locking in prices and mitigating

the risk of energy price spikes.

In the long term, higher energy prices could make it more

difficult to source renewable energy at a commercial

price. This would increase the risk that the transition to

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.

• High energy prices have the ability to

impact upon all areas of the economy.

They increase the likelihood, and

length of a recession. The positive

impacts are that encourage more

investment in projects for the use of

sustainable energies, and a greater

focus upon energy efficiency

• Energy contracts to provide stability to the price paid. Gas price

fixed until end of 2025, electricity fixed to 31 March 2023

• Investment in energy saving projects, such as heat source pumps,

building management systems, cellar cooling, voltage

optimisation, air-flow rather than ventilation and catering

equipment efficiency

• Government support for small businesses to cap prices and

guard against the most excessive increases

• Transition to Net Zero away from fossil fuels

• Transition of our supply chain to Net Zero

• Technological innovation

• Public support and awareness of the need to invest in

greentechnology

• Investment in the energy performance ratings of our building

• Evaluation of energy savings projects

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.

RISK AND RISK MANAGEMENT CONTINUED

Our principal risks and uncertainties

Risk movement key:

Increased Decreased No change

Linked opportunity key:

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RISK AND RISK MANAGEMENT CONTINUED

Our levels of defence

1. Management ownership of risk

andcontrol

The Group operates within a clear set of

policies established by the Board, and the

Executive Committee. Adherence to these

policies governs the parameters within

whichthe business accepts risk. Authority is

delegated through the business to ensure

thatmanagement is empowered to operate

effectively while staying within the system of

governance approved by the Board. Our

managers are responsible for identifying risks,

monitoring them and operating the control

environment necessary to mitigate them to a

level which is within the risk appetite of the

business. Authority levels are aligned with

levels of management and the degree of

responsibility over risk. Changes to policies

occur at the instigation of management, in

response to either new threats, legislation or

new opportunities.

A record of the key controls is kept in our

Corporate Risk Register. The managers’

assessment of the effectiveness of these

controls is collected by our Internal Audit team

and reported to the Audit Committee and the

Board. Internal audit testing is performed on

key controls in order to gain sufficient

assurance on their effectiveness.

The key features of the internal control

systemare:

• A clearly defined management structure

operating within a framework of policies

and procedures covering authority levels,

responsibilities and accountabilities. Policies

are communicated to the appropriate

teams on induction and kept accessible on

the employee intranet. The policies are kept

under review, updated and communicated

when required. Awareness of the policies is

built into our induction and training

programmes.

• Embedded risk management into day-to-

day activities.

• Continual improvement by reporting on

effectiveness, recognition of weaknesses,

additional investment and by encouraging

achievement.

• A detailed formal budgeting process for all

activities, with the annual budget and

projections for future years formally

approved by the Board.

• Established procedures for planning,

approving and monitoring capital

expenditure and major projects designed

within a sound framework of risk

management.

• Board approval requirement for all major

investment, divestment and strategic plans

and programmes.

• At each of their meetings the Board reviews

financial and non-financial progress

towards the strategic goals. Control systems

are designed to manage rather than

eliminate risk. By their nature, such systems

provide only a reasonable and not an

absolute defence against material errors,

losses, fraud or breaches of the law.

2. Committee oversight

The Executive Committee meets regularly

toconsider how to implement the actions

required to achieve business objectives,

andto monitor risks and opportunities. The

Executive Committee takes ownership of the

implementation of the business strategy, the

operation of the business to meet operational

and financial targets, and the design of

internal controls to reduce risks. The Executive

Committee understands the Board’s appetite

for risk. Management is directed to collect

information in order to measure the control of

risk and report to the Executive Committee to

ensure that the business is operating within

therisk appetite. Management considers,

communicates and implements the decisions

on risk made by the Board and the Executive

Committee and continually reports on the

impact of those decisions.

Within our management structure we

operate several committees in order to focus

attention upon areas of risk requiring senior

management attention:

Risk & Compliance Committee

(Chaired by the General Counsel &

Company Secretary)

The Committee reviews the identification

ofthe principal risks and considers the

alignment of internal audit testing. It also

conducts an examination of areas where risks

are significantly changing. The Committee

tracks the emergence of new legislation

andmonitors the Group’s preparation for

compliance. New policies are considered by

the Risk & Compliance Committee before

submission to the Executive Committee and,

where appropriate, the Board for approval.

Data Security Committee

(Chaired by the Director of Corporate Risk)

The representatives on the Committee reflect

the more significant areas of risk regarding the

protection of personal and commercial data

and cyber security. Our data security policy

and management processes are maintained

to govern legal compliance. All employees

receive data training on induction and at

appropriate intervals. Data security guidance

is always available to our employees. Our

data security Incident Response Plan is

stress-tested by scenario planning in order

toensure an effective response to any

incident. Our Data Security Analyst regularly

undertakes desktop and physical audits of

ourthird-party data processors.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RISK AND RISK MANAGEMENT CONTINUED

Our levels of defence

Business Continuity Steering Committee

(Chaired by the Director of Corporate Risk)

The resilience of the Group to events outside

of its control is considered, and the lessons

learned from any actual incidents or scenario

tests. The Committee considers the threats to

our continual operation, the resilience of our

business to cope with the unexpected

andthe rehearsal of emergency plans.

Consideration is given to the resilience of our

supply chain, our suppliers’ own planning and

our ability to seek alternative supplies at short

notice. The Committee is briefed on

improvements to IT resilience, its protection

from interference and its recovery plan.

3. Assurance governance

The Risk team comprises the Director

ofCorporate Risk and the Internal Audit

function. The team reports to the General

Counsel & Company Secretary who can

elevate matters regarding risk, where

appropriate, to the Board. The Director of

Corporate Risk attends the Audit Committee

meetings and can raise any concerns

regarding risks independently.

Enterprise Risk Management (ERM)

The Director of Corporate Risk operates an

ERM process in order to identify, monitor and

report on those risks which could impact on

our ability to achieve our strategic objectives.

The key risks and controls are recorded in our

Corporate Risk Register. The ownership and

assessment of risks is discussed and recorded

during regular meetings with the relevant and

responsible managers. The Corporate Risk

managers in order to keep it current and

relevant to the business. We use common

riskmanagement tools and language to

engender cross-functional consistency and

measurement across the Group. Levels of

insurance cover are managed by the Director

of Corporate Risk, with the authority of the

Board, and in consultation with external

advisers. New levels of insurance and cover

are considered each year in the context of

the changing risks and external threats.

Internal Audit

The Internal Audit team is managed by the

Director of Corporate Risk and is independent

from the operations of the business. Internal

audit strategy is risk based and testing is

focused on principal or material risks. The

strategy has been approved by the Audit

Committee and aims to provide a sufficient

level of assurance regarding the strength of

the control environment as well as supporting

continual improvement in risk management.

The Internal Audit plan produced takes into

consideration the key risks within the business,

recorded in the Corporate Risk Register, areas

of increased risk and the regularity of the

testing. The plan is developed in consultation

with the Executive Committee and the Risk &

Compliance Committee and takes into

account areas of concern which require

additional assurance from audit testing. Once

approved, internal audits are undertaken by

the Internal Audit team with support from

senior management and, where necessary,

additional resource and expertise are sought

from an independent professional internal

audit co-source. The annual budget for

internal audit is approved by the Executive

Committee and the Audit Committee.

The Internal Audit team audits the strength

ofour profit protection controls within the pubs,

using either data analysis to identify pub sites

ofconcern or following requests from Area

Managers. The results of this testing, providing

there is no conflict, are communicated to

theoperational managers and follow-up

audits can be arranged if necessary to

measure improvement.

4. Strategic

The Executive Committee is chaired by

theChief Executive Officer and comprises,

amongst others, the two operational directors

who are responsible for the implementation of

strategy and for carrying out actions directed

by the Board, monitoring performance and

overseeing risk management and internal

control. Actions required are communicated

tothe senior managers within the business.

5. Board/Audit Committee

The Board is ultimately responsible for the

Group’s framework of governance, internal

control and risk management. The mitigation

of risk is delegated to the Executive Directors

and other senior management. The Board is

responsible for ensuring that management

reviews and reports on the effectiveness of the

internal controls. The Board is also responsible

for understanding the nature and extent of

the principal risks, its risk appetite and the

Viability Statement.

The Management reporting to the Board

isinsufficient detail for the Board to assess

itsrisk appetite in the context of the risks

andopportunities, and to make informed

decisions in order to accomplish the strategic

objectives. During the year, the Board has

robustly assessed the risks and opportunities

faced by the business, considering the

abilityof the business to achieve its

strategicobjectives and the impact

ofemerging legislation.

New Non-executive Directors of the

Boardareinducted into the business

throughmeetings with senior managers, the

Executive Committee, the finance team and

external advisers. This gives new Directors the

opportunity to understand the challenges

forthe business, risks and the controls and

processes operated. New Directors are

alsogiven a pack of information on business

operations and access to previous Board and

Committee minutes as appropriate.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

RISK AND RISK MANAGEMENT CONTINUED

Viability statement

To assess the impact of the Group’s principal

risks and uncertainties on its long-term viability,

a severe but plausible downside scenario was

applied to the Group’s financial forecasts in

the form of reduced sales, it has been assumed

that variable costs will move in line with the

change in sales volumes. It is assumed that

theGroup’s financial plans would be adjusted

in response to each scenario by reviewing

controllable and discretionary costs alongside

capital investment.

The principal risks currently facing the

businessrelate to the continued uncertainty

surrounding the political and economic

environment with regards to the cost-of-living

crisis, (market and operational (risk 1),

pandemic (risk 2) and political and economic

(risk 6) and subsequent variants and the

consequential impact on trading should

anyfuture restrictions be imposed, thereby

inhibiting activity and sales income. The

Group has reviewed this in the forecast

scenarios and sensitivities by incorporating a

reduction in sales (downside scenario). Whilst

the experience of the cost-of-living crisis and

the pandemic could be expected to lead to

lasting changes in both consumer behaviour

and competition in the hospitality sector, in

making this assessment the Group has taken

the view that any adverse impact on sales,

through reduced visits from the cost-of-living

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.

Liquidity (risk 3), both secured debt and

unsecured facilities, is assessed in the forecasts

and, in both the base case and the severe but

plausible downside case, the Group will be

required to seek amendments to covenants

on its banking facility. Whilst there is no

certainty that these amendments will be

granted (this has been disclosed as a

materialuncertainty over going concern

inthe financial statements), given our

experiences to date we are confident of

securing these where necessary. In all

scenarios the Group continues to remain

profitable with adequate liquidity.

In the forecasted period the Group is required

to refinance its banking facility and private

placement facility in March 2024 and it has

been assumed that this would be on similar

terms as the current facility.

In terms of resilience, the forecast considers

market and operational (risk 1), political and

economic (risk 6) and energy (risk 8) risks,

focusing on the impact on sales with a

reduction in turnover from fewer guest visits

alongside increasing costs from inflationary

pressures, interest rate rises and regulatory

changes. The forecasts took into account

market insight and trends based on changing

consumer behaviour and therefore

considered the allocation of capital

toadaptto these trends.

In making this statement, the Directors

carried out a robust assessment of the

principal risks and uncertainties facing the

Group, including those that would threaten

its business model, future performance,

solvency or liquidity. Principal risks and

uncertainties set out on pages 45–52 are

theresult of internal risk management and

control processes, with further details set

outin the Audit Committee’s report on

pages 69–71.

In accordance with provision 31 of the

UKCorporate Governance Code 2018,

theDirectors confirm that they have a

reasonable expectation that the Group will

continue to operate and meet its liabilities,

as they fall due, for the next three years.

Consistent with the previous year, three years

continues to be adopted as an appropriate

period of assessment as it aligns with the

Group’s planning horizon in a fast-moving

market subject to changing consumer tastes

in addition to economic and political

uncertainties, and is supported by forecasts

as approved by the Board. It also aligns with

the Group’s capital investment plans and

gives a greater degree of certainty over the

forecasting assumptions used.

The Directors’ assessment has been made

with reference to the Group’s current

position, its financial plan and financial

planning process, comprising a detailed

forecast for the next financial year, together

with a projection for the following two

financial years. The plan also reflects the

Group’s principal risks and uncertainties set

out on pages 45–52, specifically market and

operational (risk 1), pandemic (risk 2),

liquidity (risk 3), political and economic

(risk6) and energy (risk 8).

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT

Chair’s introduction

WILLIAM RUCKER

MARSTON’S CHAIR

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

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 172(1) statement is

set out on page 56, demonstrating how we

have fulfilled our section 172 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.

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

prou d of’.

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

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

Tenure of Chair and

Non-executive Directors

0–3 years

3–6 years

Board gender diversity

Female

Male

Balance between Executive

andNon-executive Directors

Chair

Executive Directors

Non-executive Directors

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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 72 TO 94

CORPORATE GOVERNANCE REPORT CONTINUED

Chair’s introduction

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

BOARD OF DIRECTORS

An experienced Board

Board committees:

Audit Committee

Remuneration Committee

Nomination Committee

Denotes Committee Chair

Board skills:

Consumer/Retail

Hospitality

Commercial property

People

Finance

ESG

William Rucker

Non-executive Chair

Octavia Morley

Senior Independent Director

Andrew Andrea

Chief Executive Officer (CEO)

Hayleigh Lupino

Chief Financial Officer (CFO)

Appointed: October 2018, independent

onappointment

William is a Chartered Accountant with

experience in banking and financial services.

He is Chairman of Lazard in the UK and brings

a wealth of knowledge and experience of

financial markets, corporate finance and

strategy to his leadership of the Board. William

has recently been appointed as Chair at ICG

PLC, with effect from 31 January 2023, and is

also currently Chairman of the UK Dementia

Research Institute. William’s City and financial

experience, alongside his strong stakeholder

management skills, ability to help businesses

grow and his previous Chairman roles, make

him ideally placed to be Chair of Marston’s.

Past experience:

Chairman of Crest Nicholson Holdings plc

Chairman of Quintain Estates and

Developments

Non-executive Director of Rentokil Initial plc

Appointed: January 2020

Octavia is currently Senior Independent

Director at Card Factory PLC and at Crest

Nicholson Holdings PLC, Non-executive

Director at Ascensos Ltd and Chair of Banner

Group. She has extensive experience in both

executive and non-executive roles in retail

and multisite companies, having held various

senior operational and strategic roles across

areas of retail.

Past experience:

Executive and Non-executive Chair of Spicers-

Office Team Group Ltd

Non-executive Director of John Menzies PLC

Chief Executive Officer, then Chair, at

LighterLife UK Limited

Managing Director at Crew Clothing Co Ltd

Chief Executive at OKA Direct Limited

Appointed: March 2009

Andrew was appointed CEO from 3 October

2021, having previously been Chief Financial

and Corporate Development Officer since

2016. Andrew joined the Company in 2002 as

Divisional Finance Director for Marston’s Beer

Company and in 2006 he became Operations

Director for Marston’s Pub Company. Andrew

was then appointed to the Board as Finance

Director in March 2009. He is also currently a

Non-executive Director at Portmeirion Group

PLC and a Non-Executive Director of CMBC.

Andrew is a qualified Chartered Accountant

and brings to the Board experience gained in

financial and commercial roles, including

strategy and leadership, risk management

and mergers and acquisitions.

Past experience:

Roles held at Guinness Brewing Worldwide,

Bass Brewers Limited and Dolland & Aitchison

Appointed: October 2021

Hayleigh was appointed CFO of the Group

from 3 October 2021, having previously been

Director of Group Finance, and held a

number of senior roles for Marston’s Beer

Company. Most recently, she played a key

role in creating the partnership between

Marston’s Beer Company and Carlsberg UK.

She is currently a Non-Executive Director of

CMBC. Hayleigh is also a Trustee Board

Director at the Wolverhampton

GrandTheatre.

Past experience:

Senior roles held within Marston’s PLC

N A

Terms of reference for each Committee are available on the

Corporate section of our website: www.marstonspubs.co.uk

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Bridget Lea

Independent Non-executive Director

Matthew Roberts

Independent Non-executive Director

Nick Varney

Independent Non-executive Director

Bethan Raybould

General Counsel & Company Secretary

Appointed: September 2019

Bridget is currently Managing Director –

Commercial at BT Group having previously

held the role of Managing Director (North)

atJSainsbury plc. Bridget has had a

distinguished career working across multiple

leading retail brands and held senior positions,

spanning a wide range of disciplines including

sales, operations, marketing, supply chain and

digital within retail corporates.

Past experience:

Managing Director (North) at J Sainsbury plc

Director of Stores, Online and Omnichannel

atO2

Appointed: Ma rch 2 017

Matthew has significant real estate and retail

experience having previously been CFO and

then CEO of Intu Properties plc, until June

2020. Matthew is a qualified Chartered

Accountant (FCA) and has recent and

relevant financial experience, enabling him

to contribute effectively to the Group as the

Chair of the Audit Committee. He is also a

trustee at Charitable Giving.

Past experience:

Chief Executive Officer and Chief Financial

Officer of Intu Properties plc

Chief Financial Officer of Gala Coral Group

Limited

Finance Director of Debenhams plc

Appointed: July 2022

Nick has over 30 years’ experience in the

Leisure sector, having started his career in

consumer goods marketing with Nestle

Rowntree and then with Reckitt & Colman

plc.He recently retired as CEO of Merlin

Entertainments. Nick is also a Board member

of UK Hospitality.

Past experience:

Chief Executive Officer of Merlin

Entertainments

Managing Director at Vardon Attractions,

Vardon plc

Marketing Director at The Tussauds Group

Appointed: February 2022

Bethan joined the Company in 2013 as legal

counsel, and was appointed General

Counsel & Company Secretary in February

2022. She is responsible for managing legal

risk and supporting the Chair and the Board

in maintaining high standards of corporate

governance. Bethan also leads the safety,

audit and risk functions. Bethan is a senior

solicitor with over 15 years’ experience in

both private practice and in-house roles.

A A N

N N R

R R

BOARD OF DIRECTORS CONTINUED

An experienced Board

Board committees:

Audit Committee

Remuneration Committee

Nomination Committee

Denotes Committee Chair

Board skills:

Consumer/Retail

Hospitality

Commercial property

People

Finance

Climate change

Terms of reference for each Committee are available on the

Corporate section of our website: www.marstonspubs.co.uk

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT

Board leadership and company purpose

Purpose, values and culture

The Board is responsible for establishing

theCompany’s purpose, values and strategy

and plays a vital role in ensuring that the

Company’s culture is aligned with those values

and strategic objectives.

In November 2021, the Company set out its

vision and strategy: ‘Pubs to be proud of’, with

clearly defined values, goals and targets

which promote the long-term success of the

Company. The strategy was developed to

reflect the development of our business as a

focused pub operator and the values aimed

to capture the essence of the unique culture

at Marston’s.

The Board continuously monitors and assesses

the special culture at Marston’s and is satisfied

that it reflects, and is reflected by, our purpose

and values; all of which are, in turn, aligned

toour strategy. The Board does this in a

varietyof ways:

Employee engagement

As set out on page 15, employee engagement

is principally undertaken by regular ‘Your

Voice’ monthly surveys. The Board receives

regular reports on results and key themes are

discussed at Board meetings throughout the

year, including employee views on company

culture, policies and strategy. The Board also

regularly meets with a cross section of our

people and Pub Partners by participating in

days in trade and Board dinners. Bridget Lea is

our designated Non-Executive Director for

Workforce Engagement.

Behaviour framework

The Board, the Executive Committee and

management, comprising the Leadership

Group, all lead by example by acting in

accordance with the Company’s Behaviour

Framework. This framework (which also applies

to the wider workforce) is directly aligned to

our values and purpose, thereby helping to

promote and embody culture through our

ways of working.

Alignment of policies and approach

The Board plays a key role in helping to ensure

that our policies and practices, particularly

relating to pay, bonuses and fair working

practices, are consistent with Company values

and support long-term sustainable success.

Further detail on the alignment of our bonus

scheme to our values and KPIs (which include

employee engagement) is set out on page 72.

Whistleblowing

The Audit Committee has delegated

responsibility from the Board to review

mechanisms for reporting matters of concern,

including an annual review of ‘Speak Up’, the

Company’s whistleblowing system, to ensure

those mechanisms are appropriate, accessible

and meet our expected standards of conduct.

KPI alignment and measurement

A number of our KPIs such as employee

engagement and EHO scores, allow trends in

Company culture to be continually measured,

monitored and reviewed. The Board receives

monthly KPI reports, supported by regular

presentations from the CEO and Executive

Committee.

Stakeholder engagement

The Board supports and actively encourages

good relationships with all stakeholders,

recognising their importance to the long-

termsuccess of the Company. In seeking to

understand the views of our stakeholders and

be able to fulfil their section 172 duties when

making decisions, the Board engages directly

with some stakeholder groups, including

shareholders and employees, and indirectly

with others, through sector bodies and reports

and presentations by Executive Directors,

Leadership Group and advisers. Details of

theCompany’s key stakeholders and how

thebusiness and the Board have engaged

with them, during the year, are set out on

pages 21 to 23.

In considering all opportunities and risks that

the Company faces, the Board focuses its

attention on the long-term sustainable success

of the business which ultimately generates

value for our shareholders. All proposals and

business decisions are made for the benefit

ofthe Company’s long-term sustainability,

ensuring they are aligned to our strategy,

purpose and values. The interests of relevant

stakeholders are considered as part of that

process and, while the Board recognises that it

is not always possible for decisions to achieve a

positive outcome for every stakeholder group,

the Board considers it has acted fairly and

transparently in evaluating all decisions.

Furtherinformation is set out in the Section

172(1) statement on page 20.

Annual Report and Accounts

The Annual Report and Accounts is the main

tool for providing a comprehensive review

ofthe business, details of our governance

framework in action and annual results.

Thisyear, mindful of our sustainability agenda,

increased cost and the need to reduce our

use of natural resources wherever possible,

wehave focused our efforts on the online

version of the Annual Report and Accounts,

reducing the number of printed copies to

ensure minimal waste after fulfilling the

requirements of our shareholders who still

require printed copies.

We would like to thank our investor community

for supporting this initiative andwould

encourage our investors to explore our website

and online Annual Report and Accounts. Please

contact investorrelations@marstons.co.uk

withany queries.

2023 Annual General Meeting (AGM)

The 2023 AGM will once again be held at

theFarmhouse at Mackworth in Derby, one

ofour own pubs. Shareholders are welcome

toattend in person, but we would request

thatyou register your intention to attend in

advance so we can monitor numbers and

ensure that we are adequately prepared

toaccommodate all attendees safely.

Shareholders will again be given the

opportunity to ask questions ahead of the

meeting, using a dedicated email address

(agm@marstons.co.uk) if they are unable to

attend in person. We will ensure that each

question receives a direct response, with those

questions pertinent to the business of the

meeting published on our website.

To enable all shareholders to vote on all

resolutions in proportion to their shareholding,

the voting at the 2023 AGM will be conducted

by way of a poll and shareholders are

encouraged to vote as early as possible ahead

of the meeting. The Company will release the

results of voting, including proxy votes on each

resolution, on its website on thenext business

day after the AGM and announce them

through a regulatory news service. Details of

how you can submit questions and cast your

votes at the AGM areset out in the Notice of

Meeting, which will be made available to

shareholders by their chosen method of

communication and is alsoavailable on our

website. The Board looks forward to meeting

shareholders once again.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Board leadership and company purpose

Board agenda and activities during

theyear

Agendas for each Board meeting are

prepared in advance from a forward agenda

(for all Board and Committee meetings) which

is typically prepared on arolling 12-month

basis. Agendas provide the framework for the

Board to shape and monitor the Company’s

progress towards itsvision and strategic goals.

There are a number of standing or regular

agenda items including reports from the CEO,

CFO and members of the Executive

Committee. These update the Board on a

range of matters from financial and

operational performance to stakeholder

engagement and shareholder analysis. The

remainder of the agenda comprises specific

items for discussion or debate, in accordance

with the forward agenda or as required in

response to circumstances or events or as

requested by the Board, the Committees or

management.

The Board also values presentations from the

Executive Committee, the Leadership Group

and their direct reports. The Board also

approved a number of matters during the

year by written resolution outside of the

normal Board calendar.

The key items on the Board’s agenda during

the year are set out below and those on the

Committees agendas can be found in the

Committee reports.

The Board had eight scheduled meetings

during the year, with the addition of two

unscheduled meetings, held by phone or

online where circumstances required the

Board to meet at short notice. Unscheduled

meetings are usually to discuss matters of a

transactional nature that arise outside of the

forward agenda or Board calendar. Directors’

attendance at Board and Committee

meetings held during the year is set out on

page 63.

For the scheduled Board meetings, this year

the Board was pleased to be able to return to

meeting regularly in person after the lifting of

the restrictions following the pandemic. Board

meetings are either held at our offices or at

one of our pubs, where facilities permit. As

well as providing a catalyst for strategic

debate, these locations provide the Board

with a unique opportunity to engage directly

with our people and Pub Partners.

On the Board agenda

Strategy and performance

• Received updates on Company strategy,

vision and goals, and performance metrics

• Approved a new Commercial Marketing

strategy, including segmentation of the

pub estate and new drinks strategy

• Approved removal of Two for One

operating format from our managed estate

Finance

• Bank facility financing and securitisation

waivers

• Reviewed and approved the budget for

financial year 2022/23 and 5-year plan

• On the recommendation of the Audit

Committee, approved trading updates,

interim and preliminary results and Annual

Report and Accounts

• Approval of property disposals

People

• Recruitment and resourcing updates

• Proposals for our new employer brand

‘People Promise’

• Employee engagement survey results

viaPeakon

• Approved the employee sharesave

scheme for 2022

Stakeholder focus

• Share price performance and investor

relations

• Shareholder feedback

• Year-end engagement and AGM

• Share register analysis

Governance and risk

• Approval of TCFD report

• Considered and reviewed principal risks,

emerging risks and risk management

• Evaluation of Board and Committee

effectiveness

• Governance Code, Pubs Code and other

reporting obligations

• Received an update on and approved the

Company’s 2022 Modern Slavery Statement

• Environmental, social and governance

updates

• Delegated authorities and potential

conflicts of interest

2022 strategy day

The Company has a clear strategy for

growth and the Board is responsible for

overseeing its implementation by the

Executive Committee and Leadership

Group. In addition to the regular Board

meetings, the Board carries out an annual

strategic review. This year, the Board held

its annual strategy day in Wales, followed

by a day in trade visiting a number of pubs

the Company acquired as part of the

transaction with SA Brain. The Board was

joined by the Executive Committee and a

number of senior managers who helped

facilitate the day and deliver presentations

to the Board.

The outline agenda and key priorities for

the strategy day were as follows:

• Presentation and approval of the

5-year plan

• Review of competitor landscape and

market opportunities

• Consideration of developing and

evolving a sales culture and other

innovations to deliver growth

• Defining our employer brand and

developing our ‘People Promise’

Presentations were delivered by the

Executive Committee (including the CEO

and CFO) which informed and facilitated

open discussion and debate with the

Board. The Company’s brokers also joined

the meeting to deliver a presentation to

the Board and the Executive Committee

on shareholder sentiment and market

analysis.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Division of responsibilities

There is a clear division of responsibility

between the roles of the Chair and the Chief

Executive Officer (shown below). These are

agreed by the Board. Further details of the

roles and responsibilities of each Board

member and the General Counsel &

Company Secretary are available on our

website: www.marstonspubs.co.uk

Chair

is responsible for:

• leading the Board and its effectiveness

indirecting the Company

• setting an agenda, style and tone for

constructive and open debate

• the effective contribution of all Non-

executive Directors

• supporting the CEO in articulating the

purpose, values and culture

Chief Executive Officer (CEO)

is responsible for:

• setting and implementing the strategic

objectives agreed by the Board

• providing clear and visible leadership,

demonstrating the values and ways of

working that reflect the Company’s

culture

• leading the Executive Committee and

senior management in managing the

business

• ensuring the Board is aware of shareholder

and other stakeholder views

The governance framework provides a

structure of effective management and

controls to measure and assess performance

and risk and it facilitates the sharing of

information by encouraging strategic debate

and informed and timely decision-making.

Board papers are circulated well in advance

of each meeting to ensure that the Directors

have sufficient time to consider them before

the meeting.

The three principal Committees of the

Boarddeal with financial and risk matters,

remuneration and succession planning.

Eachhas its own terms of reference which are

reviewed at least annually, and updated as

necessary, before they are considered and

approved by the Board. Reports from each

Committee can be found on pages 65, 69

and 72.

The Board is supported by the Executive

Committee which comprises key members of

the Marston’s management team: the CEO,

CFO, two pub Operations Directors (one

responsible for our Food-led pubs and

onefor our Wet-led pubs and property),

Commercial Marketing Director, HR Director

and General Counsel & Company Secretary.

Governance framework

THE BOARD

Supporting Committees

Risk & Compliance

Business Continuity

DataSecurity

Treasury

Audit Nomination Remuneration

Principal Committees

Management

Committees

Executive

Disclosure

Roles and responsibilities

Assurance

Internal controls,

auditing, legal and

regulatory compliance

Matters Reserved for the Board

Committee terms ofreference

ESG initiative

‘Doing more

tobeproud of’

Implementation

ofstrategy

Monitoring

performance

ENTERPRISE-WIDE RISK MANAGEMENT OUR BEHAVIOURS

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Division of responsibilities

The Executive Committee meets informally

each week to discuss trade for the previous

week and any issues of concern and, more

formally, almost every month to oversee the

implementation of strategy and monitor the

performance of the business. An agenda for

each formal meeting is prepared in advance

from a forward agenda which is typically

prepared on a rolling 12-month basis and is,

as far as possible, aligned to the Board’s

agenda to ensure the strategic objectives

and time horizons of the Board and

management are aligned. ‘Pulse Exec’

meetings may also be called from time to

time, outside of the formal meeting schedule,

to discuss matters that require focused

discussion, support or approval. In addition to

operational and financial performance, the

Executive Committee regularly reviews guest

and market insight, employee engagement,

health and safety reports and KPIs. During

the year, the Executive Committee also

considered and approved the ‘People

Promise’, the Commercial Marketing Strategy,

operational and strategic matters, such as

the exit from the Two for One and Rotisserie

formats, supply issues, property matters,

capital expenditure (capex) proposals and

approved internal policies, governance and

financial matters (such as new contracts,

acquisitions or disposals) within the authority

limits delegated annually by the Board.

The Disclosure Committee, comprising the

CEO, CFO and General Counsel & Company

Secretary, meet as and when required to

discuss matters arising in accordance with

the EU Market Abuse Regulation, the

Financial Conduct Authority (FCA) Listing

Rules and the Disclosure Guidance and

Transparency Rules to ensure the Company

meets its obligations.

The Supporting Committees’ primary role

istoprovide assurance to the Board on the

operation of internal controls, auditing and

compliance with legal and other regulatory

obligations. This framework is supported and

enabled by the risk management process

andour behaviours. The work of our

Supporting Committees is described in

theRiskManagement section on page 53.

Tofocus on our ESG initiatives, this year, we

have changed our ESG Committee and

formed three working groups with deeper

focus on the individual ESG elements. More

information on our ‘Doing more to be proud

of’ initiative can be found on page 24.

Documents available at:

www.marstonspubs.co.uk

• Articles of Association

• Matters Reserved for the Board

• Committee Terms of Reference

• Roles and responsibilities for each Board

member

Board and Committee meeting attendance

Scheduled Board and Committee meeting attendance is shown in the table below. The Board

calendar of meetings is set and reviewed at least 18 months in advance, allowing the Directors

to plan their time accordingly.

Name Board

Nomination

Committee

Audit

Committee

Remuneration

Committee

Andrew Andrea 8/8 – – –

Bridget Lea 7/8 2/3 4/4 3/3

Hayleigh Lupino 7/8 – – –

Octavia Morley 8/8 3/3 4/4 3/3

Matthew Roberts 8/8 3/3 4/4 3/3

William Rucker 8/8 3/3 – 3/3

Nick Varney

2/2 1/1 – 1/1

1. Nick Varney was appointed to the Board on 1 July 2022.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Composition, succession and evaluation

Comprising independent Non-executive

Directors (NEDs), an independent (upon

appointment) Chair and two Executive

Directors, all supported by the General Counsel

& Company Secretary, the Board continues to

represent a balanced combination of skills,

experience and knowledge pertinent to the

industry and business activities. Biographical

details, together with length of service and

external appointments are disclosed on pages

58 and59.

All of our Directors are expected to

allocatesufficient time to discharge their

dutiesand responsibilities effectively and this

isreviewed with the Chair, as part of the annual

evaluation process. Significant commitments

ofthe Directors, outside of Marston‘s, are

disclosed to and approved by the Chair prior

toappointment and where there are any

changes. The Company‘s Articles of Association

provide authority to the Board toauthorise

potential conflicts of interest and to impose

anyconditions it sees fit. Actual and potential

conflicts are reviewed by the Board on an

annual basis.

All Directors are subject to annual re-election

by our shareholders after an annual Board

evaluation. Each of our Non-executive Directors

are initially appointed for a three-year term;

beyond six years, the appointment is

considered on an annual basis having regard

to the tenure of the Board as a whole. Where

the Board considers it would benefit from a

change, or a retirement necessitates a change,

the Nomination Committee will lead the

process for new appointments. Prior to the

appointment of Nick Varney, the Board

considered the skills and experiences that

would further enhance the Board and were

wholly supportive of the decision to invite Nick

to join our business as anadditional Non-

executive Director. We consider all our

Non-executive Directors to be independent

and the charts on page 57 show the balance

and tenure of the Board.

Board appointments process

Through delegated responsibility to the

Nomination Committee, the Board has

aformal and transparent process for the

appointment of all new Directors. This

processincludes taking account of any gaps

in the Board’s collective skills, knowledge or

experience or any aspect of diversity, whether

identified by the annual Board composition

review by the Nomination Committee, or

theannual Board effectiveness review. The

selection process is rigorous and transparent

and, if appropriate, the Nomination

Committee will appoint an expert external

search agency to support. Candidates from

awide range of backgrounds that meet the

search criteria will be considered and all

appointments will be made on merit, with due

regard to all aspects of diversity. The search

and selection process was supported by

Ridgeway Partners, who have been used

previously for recruitment searches. Further

details on Nick’s induction are set out below.

Board training, induction and

development

As set out earlier in the Governance Report,

during the year, presentations are given at

Board meetings by the Executive Committee,

our advisers and members of the Leadership

Group. Those presentations are designed to

update the Non-executive Directors and

further improve their familiarity with, and

understanding of, the business as well as

providing an opportunity to engage with

thesenior employees and their teams.

Presentations are often arranged to coincide

with an informal Board dinner on the evening

before the meeting, typically at one of our

pubs. The Non-executive Directors may also

attend external technical seminars offered by

professional advisers and receive internal

briefings on emerging legislation, compliance

and regulatory matters as they relates to the

business. The General Counsel & Company

Secretary advises the Board on matters of

governance and is available to all Directors

inan advisory capacity, including the

appropriateness of seeking independent

professional advice. This year, the General

Counsel & Company Secretary facilitated an

additional training session for the whole Board

on Section 172 duties, the Market Abuse

Regulation and other governance and

compliance matters relevant for the Board,

inthe discharge of their duties.

On their appointment to the Board, all new

Directors receive a comprehensive induction

programme coordinated by the General

Counsel & Company Secretary. The induction

programme is tailored to each new Director,

depending on their experience and nature of

their role on the Board. For Nick Varney, in the

months prior to, and after commencement of,

his appointment, the induction was structured

to provide Nick with all the information and

support he needed to understand the

Company and its strategic objectives, the

environment in which it operates, and his role

on the Board. Briefly this comprised:

• Introductory meetings with all members of

the Executive Committee (comprising

both formal meetings and days in trade

visiting a cross section of our pub estate).

• A presentation on his duties as a director

of a UK listed company, including Section

172, the Market Abuse Regulation and the

2018 Code.

• A presentation from the Director of

Corporate Risk on the Company’s

principal and emerging risks and

relatedcontrols.

• Introductory meetings with the other

Directors and separately with the

Company’s advisers.

• Access to the Company’s Board portal

which includes a comprehensive

resources section including material Board

documents and information on the Group.

• An information pack on the Company’s

policies, practices and corporate

governance framework.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Nomination Committee report

Our responsibilities

To monitor the composition of the Board

and its Committees to ensure the right

balance of skills, experience and

knowledge.

To consider the succession plans for

Directors and senior management,

takinginto account the leadership, skills,

expertise and diversity needed to meet

the challenges and opportunities facing

the Company.

To ensure the process for identifying and

recommending suitable candidates for

Executive and Non-executive Director

positions delivers the desired outcomes.

DEAR SHAREHOLDER,

As set out in my opening remarks on page 56,

last year saw a number of key appointments

to strengthen the Executive Committee and

the Leadership Group, in addition to the

appointment of a new CEO and CFO. The

business has undergone a period of change

and alignment during Andrew’s first year as

CEO and the Nomination Committee is

pleased that his senior management team is

firmly established, working well as a team

and focused on delivering our strategy and

achieving the Company’s goals and vision of

‘Pubs to be proud of’. I am pleased to present

an update on the Nomination Committee’s

activities during the period.

Board appointment

We were delighted to welcome Nick Varney

to the Board as an independent Non-

executive Director. Nick brings a highly

complementary skill set and experience in

the retail sector which will further enhance

the knowledge, skills and experience of our

Board. The Nomination Committee led the

process for Nick’s appointment and further

details can be found on page 64.

Succession planning

The Nomination Committee also monitor

succession planning at Board, Executive

Committee and Leadership Group level and

continues to recognise the importance of

developing our people through a diverse

talent pipeline.

The Committee received updates on key

activities undertaken to further develop the

Executive Committee and strengthen the

quality of the Leadership Group.

I am pleased to see that the Company has

capable and committed leaders, at its core,

and invests in their development.

We continue to review our succession

planning strategy to ensure the composition

of the Board and senior management

teamreflects and aligns with the needs

ofthe business.

Board evaluation

During the year, an evaluation of the Board

and its Committees was undertaken in

accordance with the Nomination

Committee’s Terms of Reference. Further

information can be found on page 67. I am

satisfied that the Board has a good balance

of experience, skillset and sector knowledge

to help steer the Company towards the

achievement of its goals and vision.

I have concluded that each Director

standing for election or re-election at the

forthcoming AGM is effective in their role

andprovides a valuable contribution to the

Board. I therefore recommend each Director

to you.

Our priority areas for the coming year will be

to continue to focus on succession planning

for both the Board and senior management

and to ensure we have a pipeline of talented

and capable people with the right balance

of skills and all aspects of diversity.

WILLIAM RUCKER

CHAIR OF THE NOMINATION COMMITTEE

Attendees

Executive Directors, senior management

and external advisers may be invited to

attend from time totime.

Key activities during the

reportingyear

• Led the recruitment and appointment

process for Nick Varney

• Reviewed the structure, diversity, size

and composition of the Board and

considered Board succession planning

• Considered this year’s Board

evaluationprocess

• Reviewed succession plans for

theExecutive Committee and the

Leadership Group, including receiving

an update on the talent pipeline

• Reviewed the terms of reference

andeffectiveness of the Nomination

Committee

• Reviewed the independence,

contribution and time commitment

ofeach Director

• Considered and approved each

Director standing for election and

re-election at the 2023 AGM

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Nomination Committee report

Board diversity

As a business we are committed to building a

diverse and inclusive culture where our people

(and our guests) feel welcome and included

for who they are. The Board takes its

responsibility in leading this commitment

seriously and applies the same approach to

appointing Board members as the Company

does with its employees. Further details are set

out on the following page and in our policy,

which can be found on our website:

www.marstonspubs.co.uk. Recognising the

value and richness of diverse experience and

backgrounds to the Company, the Committee

continues to appoint on merit and ensures that

its recruitment processes incorporate the

widest range of suitable candidates from

diverse backgrounds. As at the date of this

report, three of Marston’s seven Directors are

female and two consider themselves to be

from an ethnic minority background. On the

Executive Committee, four of the seven

members are female, and two consider

themselves to be from an ethnic

minoritybackground.

Diversity and inclusion

At the heart of everything Marston’s stands for

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

ensure this commitment is reflected through

three areas of focus:

• How we attract, nurture and develop

ourpeople

• How we ensure our guests have the best

experience possible

• Supplier diversity to ensure inclusive

procurement and an inclusive work

environment.

Our vision is to be an employer of choice,

with a rich and diverse mix of people who

reflect the societies and communities within

which we work and serve. Our policy applies

to our Board members, all of our employees,

our guests and our supply networks and

reinforces our commitment to equality,

diversity and inclusion and to having a truly

representative workforce where every

member of our team, every guest and every

supplier feels respected, valued and able to

be their best.

Marston’s is a great place to work and we will

continue to build on that by not tolerating or

condoning any kind of inequality or unlawful

discrimination. When issues do arise, we will

treat them sensitively and fairly. Furthermore,

we are committed to promoting a more

inclusive environment to attract and promote

greater diversity of talent and partnerships.

A copy of the policy can be found on our

website: www.marstonspubs.co.uk

Gender diversity reporting

Number of employees at 1 October 2022

Senior managers

(Executive Committee and Leadership Group)

Female – 13

Male – 20

Total employess

Female – 6,853

Male – 5,294

Election and re-elections

With the exception of Nick Varney, who was

appointed to the Board with effect from 1 July

2022 and will stand for election, all Directors

will offer themselves for re-election at the

forthcoming AGM on 24 January 2023. Details

of each Director serving on the Board at the

date of this report are set out on pages 58 to

59 and shall be set out to shareholders in the

Notice of Meeting. The Board is of the opinion,

as recommended by the Nomination

Committee, that each Director standing for

election or re-election makes an effective

and valuable contribution to the Company’s

long-term sustainable success.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Nomination Committee report

Board evaluation

As required by the 2018 Corporate

Governance Code, the Company

undertakes an annual evaluation of the

effectiveness and performance of the

Board, its Committees and the Chair. The

evaluation process helps inform any training

and development needs of the Directors,

improve overall effectiveness and identify

any skill gap that might exist.

An internal evaluation of the effectiveness

of the Board and each of its Committees

was undertaken this year, led by the Chair

and supported by the General Counsel

&Company Secretary. All Directors,

regular attendees of meetings, key

advisers and the Company Secretary

were invited to complete an online

questionnaire throughthe Company’s

Board portal, covering all aspects of

Board and Committee performance,

effectiveness and contribution. The

Non-executive Directors also met

withoutthe Chair being present to

discusshis performance and the

conclusions werefed back to the

Chairbythe Senior Independent

Director.TheChair then summarised

thecomments for consideration and

discussion by the Board. Details of the

conclusions, togetherwith an update on

the 2021 recommendations, are set out

further onthis page.

The Chair concluded that the Board is

satisfied with its effectiveness and that of its

Committees. The Non-executive Director

continue to value the NED-only meetings,

with and without the Chair, and further

meetings have already been scheduled as

part of the 2023 Board forward agenda.

Update on the 2021 Board evaluation:

outcomes and updates on action taken

Increased number of follow-ups on

strategictopics

Action: Each member of the Executive

Committee contributes a report to every

Board pack which highlights key strategies

and provides regular updates. These are

supported by regular presentations by the

CEO, CFO and the rest of the Executive Team.

Greater insight into the guest focus from

thenewly restructured Commercial

Marketing team

Action: Every formal meeting of the Executive

Committee includes a presentation by the

Director of Insight in the Commercial Marketing

Team and the minutes of each meeting are

circulated to the Board for information. The

Commercial Marketing Director also submits a

written report for each Board meeting and is

regularly invited to present. Our Reputation

score is a KPI and measurements are included

in the monthly information pack.

A return to face-to-face meetings, re-instating

pre-Board dinners and increasing the time

with the teams

Action: This year we have welcomed the

resumption of face-to-face meetings, Board

dinners and increasing the time and direct

engagement with senior management and

their teams. In 2023 we expect this trend

tocontinue with additional pre-Board

dinnersand days in trade baked into

theforward agenda.

A focus on more detailed KPIs including

ESGmeasures

Action: We have agreed KPIs which are

aligned to our strategy, purpose and vision as

set out on page 9. At the end of every period,

the Company produces a management

information pack which measures and reports

on the performance of each KPI; both during

the period and in aggregate for the year to

date. We have agreed ESG targets as set out

on page24 and, in 2023, we are gathering

relevant information from our business

ecosystems with a view to including these

measures in the information pack.

Broadening the composition of the Board to

support the new CEO and CFO

Action: As set out on page 56, the

composition of the Board was strengthened

by the appointment of Nick Varney.

2022 Board evaluation: outcomes and

agreed actions

• Greater visibility of KPIs throughout

theyear.

• Increasing the Board’s awareness of

stakeholder engagement, particularly

employee views and sentiment.

• Continuing focus on succession,

development, and talent including all

aspects of diversity.

• Making more time on the Board agenda

for informal engagement with the

Executive Committee and the Leadership

Group, through Board dinners and days

in trade.

• Areas identified for strategic focus for

the Board in the FY2023.

• More regular check-ins to consider

allaspects of Board effectiveness,

including communication channels

and quality and timing of Board

reports.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Fair, balanced and understandable

Throughout the year, the Board receives

updates on the performance of the business

and key challenges, opportunities and risks.

During the year-end process, comprehensive

reviews and validations are undertaken by

the Company Secretariat and Finance

teams, with support from teams across the

business to ensure that the information

provided in the Annual Report and Accounts,

when taken as a whole, is fair, balanced and

understandable. Drafts of each section of

the Annual Report and Accounts are

reviewed for consistency and alignment

across the whole document, and linkage

tostrategy, business model and risks. The

accuracy of the content is then verified by

supporting evidence before presentation

tothe Board, in good time for consideration

ahead of final approval. The external Auditor

provides reassurance through their review

processes which are focused on consistency

between the narrative and numbers, and an

assessment of whether the description of

business performance is consistent with the

understanding gained through their audit

procedures, to present a fair and balanced

report on the period.

Having reviewed the processes and

heardfrom the Audit Committee about the

discussions with the external Auditor, the

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.

CORPORATE GOVERNANCE REPORT CONTINUED

Audit, risk and internal control

Risks and internal controls

The Audit Committee receives regular and

detailed updates on the Company’s risks,

both current and emerging, and the risk

management systems that are in place to

monitor and manage its risks. These are

presented by the Director of Corporate Risk

who attends each Audit Committee meeting

to provide the Non-executive Directors with

greater transparency and deepen their

understanding of the Company’s risk

management systems and controls. The

Board as a whole considers the effectiveness

of the risk management and internal control

systems through a thorough assessment of

the risks facing the Group that could threaten

its business model or future performance. To

supplement these considerations, the Board

receives reports and updates from the Risk &

Compliance Committee along with ongoing

updates from the Executive Committee and

senior management. No material failings in

the Group’s internal controls were noted

although a number of improvements were

identified which management is now in the

process of addressing. Improvements include

reviewing the Group’s Financial Reporting

Controls and Processes Programme for

completeness and priority of financial year

2023 workstreams to improve the quality and

documentation of controls.

The Risk & Compliance Committee, chaired

by the General Counsel & Company

Secretary, is responsible for monitoring all

areas of legal and regulatory compliance

across the business and for approving Group

policies. Comprising a cross-functional group

of senior representatives from across the

business, the Risk & Compliance Committee

considers the impact of any emerging

legislation on the business and the

effectiveness of our internal controls and

compliance processes as well as receiving

regular updates on those areas identified as

our key principal or emerging risks. The Risk &

Compliance Committee also nominates and

either oversees or undertakes ‘deep dives’

into areas of emerging operational risk with

the objective of testing the Company’s

resilience and control systems. The quarterly

meetings also help inform the Internal Audit

plan managed by the Director of Corporate

Risk and any compliance testing aimed at

ensuring the Company is discharging its

obligations with regard to any relevant

legislation as well as its own policies and

procedures. Annual updates on the activities

of the Risk & Compliance Committee are

provided to theBoard.

More details on the Group’s approach to

riskmanagement and internal controls are

provided in the Strategic Report on pages

43to 55.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Audit Committee report

DEAR SHAREHOLDER,

I am pleased to present the Audit Committee

report for the period ended 1 October 2022.

The report outlines how the Audit Committee

discharged its duties over the past year and

the key areas and risks it considered in

doingso.

The Committee has continued to play

acrucial role in assessing and having

stewardship of the Group’s financial

reporting procedures and has continued

tomonitor the implementation and

effectiveness of the internal control and risk

management framework. Following this

year’s internal evaluation, I am pleased to

confirm that I consider the Committee

continues to operate effectively with

appropriate scrutiny and no significant

matters were raised as part of the evaluation.

In the first half-year, the Company was

impacted by the Omicron variant and the

Committee is also mindful of the ongoing

uncertainty posed by world events, such as

the war in Ukraine and the cost-of-living crisis.

As such, I have maintained regular

conversations with the Board Chair, the CFO

and the external Auditor partner concerning

the Company’s financial position and any

required courses of action. The Committee

has reviewed and is supportive of the

statements, judgements and estimates

management has made in arriving at the

conclusions set out in this report. In particular,

I would draw your attention to the going

concern and viability statements and the

significant financial judgements, which are

set out on pages 70 and 71.

The ongoing disruption further illustrates the

need to embed the threat of such risks into

the Company’s risk management framework,

and I remain reassured by the Company’s

response to the pandemic and the resilience

it has since shown. The Company’s response

to the pandemic and business continuity

more generally forms part of the Company’s

Internal Audit plan for FY 2022/23. I continue

to have regular meeting outside of the Audit

Committee meetings with the Director of

Corporate Risk and I am confident in his

capability and approach.

Another key focus for the Committee this

year has been considering the review of the

estate valuation, noting the impact that the

pandemic and macro conditions continue to

have on comparables. I am satisfied that

management has undertaken a thorough

process before concluding on the outcomes

of the valuation process.

Finally, the Committee is cognisant of the

proposals for the reform of corporate

reporting and audit regime in the United

Kingdom. As part of the Company’s Internal

Audit plan, management is undertaking an

assessment of the maturity of the Group’s

internal financial controls and reporting

environment, the results of which will be

reviewed by the Committee. In addition, the

Committee received various updates on the

proposed reforms from the external Auditor

and, going forward, regular updates are

planned to enable the Committee to assess

the potential impact of the reforms on the

future work of the Committee.

MATTHEW ROBERTS

CHAIR OF THE AUDIT COMMITTEE

Our responsibilities

The main role of the Audit Committee is

to assist the Board in discharging its

responsibilities by reviewing and

monitoring the integrity of the Annual

Report and Accounts and Interim

results, paying particular attention to

significant judgements, monitoring the

effectiveness of internal and external

controls and risk management systems

and reviewing the external Auditor’s

independence, objectivity and

effectiveness. The Committee reports to

the Board on its activities and makes

recommendations, all of which have

been accepted by the Board during

the period under review.

Attendees

The Director of Corporate Risk and the

external Auditor attend each meeting.

The Board Chair, CEO and CFO are

usually invited to attend all or part of

the Committee’s meetings.

Key activities during the reportingyear

• Reviewed the Interim results and full year

accounts, including the significant

judgements and estimates, going concern

statement and viability statement and

recommended approval to the Board.

• Received a report from the Estates

Director on the valuation of the estate,

considered and reviewed the valuation

including the methodology adopted by

the independent valuer.

• Considered and reviewed the use of

alternative performance measures.

• Reviewed the Company’s principal and

emerging risks, together with the

framework for managing, mitigating and

testing those risks.

• Reviewed and approved the annual

Internal Audit plan for financial year

2022/23.

• Assessed the effectiveness of the

Company’s Whistleblowing Policy –

‘Speak Up’.

• Reviewed the results of the annual

evaluation of the effectiveness of the

Committee and recommended

improvements.

• Received updates on and approved the

Statutory Pubs Code compliance report.

• Reviewed the external Auditor’s

independence, objectivity and

effectiveness.

• Reviewed the Non-Audit Services Policy

and the external Auditor’s non-audit fees

(of which there were none in the year).

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

External Audit

KPMG LLP was appointed as the external

Auditor of the Company in 2020 and the

Company’s lead Audit Partner is John Leech

who also was appointed in 2020.

Marston’s relationship with the external

Auditor is managed through their

attendance at each Audit Committee

together with regular meetings with the

Chairof the Audit Committee (both with and

without management present) providing

sufficient opportunity to interrogate and

challenge key areas and assess their

independence. The Audit Committee

reviewed the external Auditor’s effectiveness

in the following ways:

• Feedback from the members of the

AuditCommittee and regular attendees

of Committee meetings as part of the

overall review of the effectiveness of the

Audit Committee.

• Feedback from the CFO and her

seniorteam who monitor the external

Auditor’s performance, behaviour and

effectiveness during the exercise of

itsduties.

• Scrutinising all reports and audit plans

submitted by the external Auditor.

• The annual review conducted by the

Director of Corporate Risk and presented to

the Committee at the November meeting.

As a result of the ongoing review process,

management and the external Auditor

agreed some improvements to the year-end

process with the objective of making it more

efficient and effective and, where possible,

mitigating the proposed cost increases.

During the year the Committee also

considered the independence and objectivity

of the external Auditor, which was confirmed

by an independence letter from KPMG setting

out their safeguarding procedures alongside

regulatory requirements and their professional

and ethical standards.

Taking all of the above matters into account,

the Committee concluded that the audit

process, independence and quality of the

external Auditor is satisfactory, with the

appropriate level of independence and

objectivity, and therefore recommend their

reappointment to shareholders.

No non-audit services were provided this

year by the external Auditor.

Internal Audit function

As disclosed last year, the Company’s Audit

function has been reorganised into a more

efficient structure to provide assurance of

theadequacy and effectiveness of internal

controls, risk management and compliance

across the Group. The Company’s Internal

Audit function is led by the Director of

Corporate Risk. In order to safeguard the

independence of the Internal Audit function,

the Corporate Risk Director regularly meets

with the Chair of Committee and the external

Auditor (and any other member of the

Committee as required) without the Executive

Directors or management being present.

The Committee has reviewed and approved

the Internal Audit Plan for 2022/23 having

regard to the Group’s business risks and

strategic objectives. Internal Audit findings are

presented to the relevant manager and/or risk

owner and the General Counsel & Company

Secretary for review. An Internal Audit report

(together with any actions agreed with

management) is presented to the Audit

Committee on a regular basis. The Committee

reviews the effectiveness of the Internal Audit

function and assesses the quality of Internal

Audit reports, along with management’s

response, on an ongoing basis. During the

financial year 2022/23, it has been agreed

that the reports will include a tracker so that

the Audit Committee may review and assess

the timeliness of the completion of

recommended or agreed actions.

Going concern and viability

statements

Trading in the first half of the year was

impacted by the emergence of the Omicron

variant and the Committee has continued

tomonitor and review management’s

assessment of the potential impact. In

particular, it was necessary during the year

toseek amendments to banking financial

covenants across the lending banks and

private placement provider, due to the trading

restrictions caused by the impact of the

Omicron variant. The Committee noted that

the covenant amendments were granted, and

the amended covenant tests were met. The

Committee further noted that no securitisation

waivers or amendments were required.

The Committee has continued to monitor

and review management’s assessment of the

ongoing impact of COVID-19, the Group’s

financial position and exposure to principal

risks, including the cost-of-living crisis;

specifically with regard to the Group’s ability

to operate as a going concern for the next

twelve months and meet its liabilities as they

fall due over the next three years.

CORPORATE GOVERNANCE REPORT CONTINUED

Audit Committee report

Statutory Pubs Code

The Audit Committee has been updated

during the year on matters relating to the

Pubs Code and, in accordance with

those regulations, the Chair of the Audit

Committee has approved the annual

compliance report that was submitted to

the Pubs Code Adjudicator (PCA) by the

Company’s Code Compliance Officer

for the reporting period 1 April 2021 –

31March 2022 (PCA Period).

During the PCA Period, Marston’s was

notsubject to any investigations,

enforcements or representations of unfair

business practices by the PCA. During

the PCA Period, seven referrals were

made to the PCA, six of which were

withdrawn.

The Group continues to work within the

Pubs Code regulations and regularly

reviews its internal processes. During the

PCA Period, theCompany launched a

new e-learning module for all internal

and external stakeholders to help ensure

best practice and the delivery of

compliance-based training in a

consistent and comprehensive way.

The PCA compliance report can

beaccessed on our website:

www.marstonspubs.co.uk/responsibility/

statutory-pubs-code/

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Audit Committee report

The Committee has considered the

methodology of management’s projections

and forecasts, noting that they assume

moderate sales price increases, operational

costs rising broadly in line with inflation and

increased borrowing costs. The Committee

further notes that management have also

considered a severe but plausible downside

scenario, incorporating reduced visits as a

result of the cost-of-living crisis.

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,

the Group has Debt Cover and Interest Cover

covenants across its banking group and

private placement provider and Liquidity and

Unencumbered Asset Cover covenants only

with its private placement provider; the Debt

Cover, Interest Cover and Unencumbered

Asset Cover covenants are forecast to be

breached during FY2023 starting at the

31December 2022 test and will require

covenant amendments. In respect of the

Liquidity covenant associated with the

Group’s £40million private placement

borrowings, forthe October 2022 fiscal month,

there was atechnical default, for which

waivers have been secured. The Group also

obtained prospective waivers from its private

placement provider for the November

andDecember 2022 fiscal month Liquidity

covenants and further amendments to this

Liquidity covenant will be required during the

year. These waivers and amendments are

required due to the impact of COVID-19 and

the Omicron variant in H1.

The Group will continue to have regular

communication with its lenders throughout

thisperiod and, on the basis of the previous

waivers and covenant amendments

securedand the return to pre-pandemic levels

of trading during the current financial year,

the Directors expect to be able to secure the

future covenant amendments required, albeit

this cannot be guaranteed. Accordingly,

thefinancial statements continue to be

prepared on the going concern basis but

withmaterial uncertainty arising from the

current macroeconomic environment. Full

details areincluded in Note 1 to the

FinancialStatements.

Accordingly, the Committee has noted that

the Group’s financial statements have been

prepared on a going concern basis but with

material uncertainty arising from the current

macroeconomic environment.

Key estimates and significant financial

judgements

The following significant financial

judgementsand estimates were considered

bythe Committee in relation to the reporting

year. TheCommittee notes that under IFRS

management is required to make estimates

and assumptions that affect the application

ofpolicies and reported amounts. Estimates

and judgements made by management are

continually evaluated by the Committee.

TheGroup’s key assumptions and significant

judgements considered by the Committee

areset out below:

• Non-underlying items – determination of

items to be classified as non-underlying

• Property, plant, and equipment – valuation

of effective freehold land and buildings

• 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

• Financial instruments - valuation of

derivative financial instruments

CMBC impairment review

The Committee notes that CMBC operates

inasector that has been disproportionately

impacted by COVID-19 and, as such, an

impairment review was undertaken by

management under IAS 36 ‘Impairment of

assets’. The recoverable amount of the Group’s

investment was estimated on a value in use

basis. It was reported to the Committee

thatthis was based on forecast cash flows

approved by the board of CMBC, which were

reviewed by external auditors. The impairment

review undertaken indicated there was

sufficient headroom over the carrying amount.

Management concluded that no reasonably

possible change in the assumptions used

would have resulted in an impairment and the

Committee is supportive of management’s

approach and conclusions. As such the

Committee notes the recoverable amount

forthe Group’s investment in CMBC is not

considered to involve key assumptions or

significant judgements.

Market Capitalisation

The Committee notes that restricted trading

during the last few financial years, including

the impact of COVID-19 and cost-of-living

crisis, has negatively impacted the Company’s

share price, and the share price of its industry

peers, resulting in a gap between the

Company’s market capitalisation and asset

values. Management has performed a market

capital gap analysis to determine whether an

impairment of the asset values is required. The

Committee noted that the analysis showed

that there is sufficient headroom between the

total asset value and enterprise value and is

comfortable with management’s conclusion

that, as such, no impairment is required.

Estate valuation

As noted and approved by the Committee in

2021, the Group has moved to annual external

valuations of its properties, with approximately

one third of the estate being inspected each

year, on a rotational basis. Following a tender

process overseen by the Committee, Christie

& Co were appointed and undertook an

external valuation in July 2022. The Committee

met on several occasions to consider the

valuation and both the external Auditor and

the Chair of the Audit Committee met with

Christie & Co to consider their methodology

and approach. The Committee noted that the

valuer’s assumptions around fair maintainable

trade and valuation multiples were towards

the lower end of management’s expectations

but that the multiples disclosed, by both the

Group’s peers in their valuations and recent

comparable transactions, were within an

acceptable range and the Committee

accepted the valuation. The Committee notes

that the carrying value of the Group’s estate is

now £2.1 billion and as a result of the valuation

and leasehold impairment review, there is an

effective freehold impairment reversal of

£88.4 million and a leasehold impairment

reversal of £5.0 million, giving a £93.4 million

increase in net book value. Further details are

set out on page 18.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Directors’ remuneration report

DEAR SHAREHOLDER,

I am pleased to present our report for

theperiod ended 1 October 2022 which

setsout the details of our new Directors’

Remuneration Policy, being put to

shareholders at the 2023 AGM, Directors’

remuneration in respect of 2021/22 and

howwe intend to operate the Remuneration

Policy in 2022/23.

Performance outcomes for the year

Annual bonus 2021/22

Stretching targets were set at the start of

2021/22, amidst continuing supply and labour

challenges and growing concerns over rising

inflation, energy costs and interest rates.

Targets were based on a balanced mix of

financial (EBITDA and FCF) and strategic

measures (performance vs Peach market

tracker, Reputation scores and employee

engagement).

During the year, the Remuneration

Committee reviewed the operation of the

Peach market tracker, which provides sales

data for the UK eating and drinking out

market. Following that review, at the March

2022 meeting, the Committee replaced the

Peach market tracker with a Group sales

measure with equivalently stretching targets.

As part of a balanced scorecard, Group

sales better reflects overall financial

performance.

Having made a strong start to the year, with

promising levels of Christmas bookings, the

business was heavily impacted by the trading

restrictions imposed as a 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

rendered unachievable. Recognising the

need to maintain motivation within our pub,

operational and support teams, the

Committee concluded that it would be in

shareholders’ interests if the targets for both

financial measures were adjusted to exclude

the negative impact of Omicron by removing

trading periods 1–4.

Overview of performance in 2021/22

and business context

The first half of the reporting year was

impacted by the trading restrictions and

consumer confidence as a consequence of

the Omicron variant of COVID-19. Following

the launch of our ‘Pubs to be proud of’ vision,

at the start of the 2021/22 FY, our people

worked incredibly hard to deliver our core

pub and corporate goals.

Total revenue for the reporting year

increased by 99% to £799.6 million (2021:

£401.7 million), principally reflecting our

recovery from a period severely impacted

bythe global pandemic and the significant

restrictions on pub trading during the prior

year. We have seen high levels of guest

satisfaction and standards, delivered by our

engaged workforce. The performance of the

business supports the progress against our

strategic goals and the transformation of our

business during the reporting year.

Given the significant disruption to trading

and margins in the reporting year, and the

potential for continuing uncertainty, the

Board has agreed that it would not be

appropriate to propose a dividend in respect

of FY 2021/22. 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

keep our dividend policy under review.

The Committee also agreed that, in the first

full year of our 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 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 were

assessed over the full 12 months. As a result,

the bonus opportunity for the year was

reduced from 100% of salary to 76.66%

ofsalary.

The adjustments to the bonus were aligned

across the wider workforce and the original

and adjusted target ranges can be found on

p a g e 8 7.

During the remainder of the year, our business

was impacted by continuing supply chain

challenges, volatility in our economy, rising

energy costs and the cost-of-living crisis.

Performance against our financial measures

(Group sales, EBITDA and FCF) did not reach

threshold and no bonus is payable against

those measures. However, we have worked

hard to raise standards, engage with our

people and to consistently improve guest

experiences. We were delighted to see our

employee engagement score achieve 7.8 at

the end of the reporting year, surpassing our

threshold target and very close to our

ambitious target of 8.0. Despite a challenging

year for our people, they have remained fully

engaged, which is a notable achievement

given the high turnover rate seen in our sector.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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 14% 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 125% 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 150%

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 headroom

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Directors’ remuneration report

The key decisions taken for 2022/23 included:

Base salary and fees effective

1October2022

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

the Executive Directors.

Non-executive Director and Chair’s fees

have been increased by 3% for 2022/23.

Annual bonus for 2022/23

The annual bonus opportunity for Executive

Directors will be 100% of salary, in line with the

previous year. Performance measures remain

unchanged and are aligned to our strategic

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.

LTIP for 2022/23

There were no proposed changes to the

maximum grant limit of 150% of base salary

under the current policy, recognising that this

provided headroom above the currently

applied grant level of 125% of salary. 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 125%

of salary to 150% for the CEO combined with

challenging and stretching performance

targets to drive top-end performance.

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 150% back to 125% of salary, with the

same proportionate scale back for the CFO,

whose grant level would reduce from 125% to

104%. Despite the scale-back, stretch targets

will still be set.

ROCE has been introduced as a performance

measure. ROCE, alongside the other measures

previously included (NCF, TSR and PBT), will

provide a rounded assessment of our overall

profitability and shareholder return.

Other considerations during the year

Executive Director pay and the wider

workforce

We aim to operate with fairness, integrity,

and transparency across the business. Salary,

benefits and performance related rewards

provided to employees are taken into

account when setting the policy for

Executive Directors’ remuneration.

Salary increases across the workforce were

reviewed during the year, taking into account

inflation. For the majority of our pub teams,

their remuneration is set by statute rather than

the market. However, following the statutory

increases applied in April 2022 to the National

Minimum Wage (NMW), the Company

applied additional increases that ensured

ourteam members are paid more than the

statutory minimum, regardless of their age.

The Committee also has oversight of how

bonus schemes throughout the organisation

align, and of the performance measures,

targets and outturn of each scheme. The

amendments made to the 2021/22 bonus

measures and the pay-out under the bonus

were aligned across the workforce.

The achievement of our strategic objectives is

dependent upon the quality of our people.

The engagement and enablement of our

teams remains front and centre of our plans.

The Committee has engaged directly with

employees to explain the alignment of pay

across the Group (including the Directors’

Remuneration Policy).

An in-person session was originally planned

for19 September 2022 but, due to the Bank

Holiday for the Queen’s funeral, the session

was held virtually in October 2022. The

Directors’ Remuneration Policy and its

implementation were not raised as a material

issue in the discussion during the engagement

and so no amendments to the Remuneration

Policy or its proposed implementation were

required. Positive comments were made on

the bonus opportunities for the workforce,

particularly on the alignment of performance

measures and understanding of their

contribution to the Company’s performance.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

Our responsibilities

• Determining the framework and policy

for Executive Directors’ remuneration.

• Within that framework, setting the

remuneration for the Executive Directors

and other members of the Executive

Committee (including the General

Counsel & Company Secretary).

• Setting the Chair’s remuneration.

• Establishing remuneration schemes

thatpromote long-term shareholdings

byExecutive Directors, that support

alignment with long-term shareholder

interests.

• Designing remuneration policies and

practices to support strategy and

promote long-term sustainable success,

with remuneration aligned to the Group’s

purpose and values and linked to the

successful delivery of our long-term

strategy. Choosing appropriate

performance measures and targets for

annual and long-term incentive awards,

exercising independent judgement and

discretion when considering awards and

pay-outs, taking account of Group and

individual performance, and wider

circumstances.

• When determining remuneration policy

and practices, considering the Code

requirements for clarity, simplicity, risk

mitigation, predictability, proportionality

and alignment to culture.

• To consider remuneration policy in the

context of the wider workforce benefit

structures, pension provision and

remuneration trends across the Group

andchallenge, when necessary,

toensurealignment.

Key activities of the Committee

inrespect of the year

• Reviewed the Remuneration Policy

ahead of the 2023 AGM.

• Consulted with investors on the

Remuneration Policy and the proposed

implementation of the Policy in 2022/23.

• Engaged with the wider workforce on

the alignment between Executive pay

and the wider workforce.

• Consideration of pay review proposals

for the Chair, senior management and

the wider workforce.

CORPORATE GOVERNANCE REPORT CONTINUED

Directors’ remuneration report

Shareholder engagement

During 2022, we engaged with our largest

investors as well as Institutional Shareholder

Services (ISS), Investment Association (IA) and

Glass Lewis, to understand their views on our

proposed new Policy and the proposed

implementation in 2022/23. Overall, the

feedback received was supportive for the new

policy, although there was encouragement for

restraint on any quantum increases at the

current time. The Committee took these views

into account when finalising the policy

proposals and operation for FY 2022/23.

We welcome and encourage all

feedbackfrom our shareholders as it

helpsinform our thinking on remuneration

mattersand we hope we can rely on your

continuing support. If you would like to

contact me directly to discuss any aspect

ofour Policy or this report, then please email

me at remunerationchair@marstons.co.uk.

Iwill be available at the AGM (on 24 January

2023) to answer your questions. Alternatively,

if you are not able to attend or, if any

prevailing restrictions at the time prevent the

AGM frombeing held as a physical meeting,

pleasedo send your questions to the

emailaddress above.

OCTAVIA MORLEY

CHAIR OF THE REMUNERATION COMMITTEE

• Continued to monitor the impact of

theCOVID-19 pandemic on employee

wellbeing, reward and motivation as the

business reopened.

• 2022 bonus and 2019/20 LTIP award

outturns, as outlined above.

• Consideration of targets for Operational,

Group, senior management and

Executive Director bonus schemes.

• Consideration of LTIP grants.

• Review of Executive Directors’ and

senior management shareholdings in

the Company, in the context of

shareholding guidelines.

• CEO pay ratio reporting.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Directors’ remuneration report

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.

Korn Ferry were appointed by the Committee

following a review in 2022 and attend meetings

when required. Korn Ferry provided advice

onthe Remuneration Policy and supported

management with technical matters relating

to the execution of the Committee’s decisions.

Korn Ferry received fees amounting to £35,762

during the year in respect of advice given to

the Committee. Korn 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 Korn

Ferry, Deloitte received fees amounting to

£5,200 during the reporting year, in respect

ofadvice given to the Committee.

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 Varney1 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.

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% 14,551,016 13.95% 104,343,889 131,691

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CORPORATE GOVERNANCE REPORT CONTINUED

Remuneration summary

Performance snapshot

Annual bonus performance

Measure Performance Achievement (% of max)

Group EBITDA 30% 0%

Group Free cash flow 40% 0%

Group Sales 10% 0%

Reputation score 10% 100%

Employee engagement 10% 40%

Long-term incentive performance

Measure Performance Achievement (% of max)

Underlying EPS 40% 0%

Net cash flow 40% 100%

Relative TSR vs FTSE250 (excluding Investment Trusts) 20% 0%

Total remuneration

Salary Benefits Pension Other

Andrew Andrea

Hayleigh Lupino

Annual Bonus Long-term incentives

Total remuneration

£900,000

£800,000

£500,000

£600,000

£700,000

£300,000

£400,000

£200,000

£100,000

£0

2021

2022 2022

Implementation for 2022/23

Base Salary • Andrew Andrea – £620,626 (3% increase)

• Hayleigh Lupino – £397,838 (3% increase)

Benefits No change

Pension 3% of salary

Bonus • Maximum opportunity: 100% of salary

• Subject to EBITDA, FCF, sales, reputation score and employee

engagement score objectives

• One third of any bonus earned will be deferred for three years

LTIP • Maximum opportunity:

− Andrew Andrea –125% of salary

− Hayleigh Lupino – 104% of salary

• Awards subject to NCF, TSR, PBT and ROCE

• 2-year post-vesting holding period applies

Shareholding guidelines • In employment: 200% of salary

• Post-employment: 200% of salary for 2 years

Incentive timelimes

Year 1 Year 2 Year 3 Year 4 Year 5

Annual bonus

Long-term Incentive plan

Key: Performance period Deferral/holding period

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MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Remuneration Policy

This report has been prepared in accordance with the provisions of the Companies Act 2006,

the Large and Medium Sized Companies and Groups (Accounts and Reports) (Amendment)

Regulations 2008 and the subsequent amendments, and the Financial Conduct Authority

(FCA) Listing Rules. In addition, the report has been prepared on a ‘comply or explain’ basis

with regard to the UK Corporate Governance Code 2018.

The Remuneration Policy described in this section is intended to apply for three years and will

be applicable from the date of approval by shareholders at the Company’s 2023 AGM.

The key changes to the Policy are set out below.

• Pension:

− All Executive Directors must have a pension contribution in line with the wider workforce

(currently 3% of salary) rather than just new hires. This element is purely a change to the

Policy wording, as the current Executive Directors already comply.

• Annual bonus:

− The Remuneration Committee reviewed the market competitiveness of the packages

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

made a modest increase to the maximum bonus opportunity available under the Policy,

from 100% to 125% of salary.

− Currently, bonus payments up to 40% of the maximum are payable in cash and those in

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

requirement for the bonus deferral has also been removed. This means that part of the

bonus will always be deferred, which will help the Executive Directors (and Executive

Committee to whom this will also apply) build up a shareholding in the Company quicker

and aligns with market practice.

− The pay-out schedule for the financial and non-financial measures will be aligned with

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.

− The policy regarding dividend equivalents has been updated to reflect market practice.

Rather than dividend equivalents only being awarded from the end of the performance

period until the date of release, the participants may receive dividend equivalents 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 option).

• Shareholding requirement:

− The current Policy requires Executive Directors to hold 100% of all vested shares from

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

hold 50% of deferred shares, as well as vested LTIP awards until the guideline is achieved.

This brings this feature in line with normal market practice and provides a better balance

between a cash payment and the retention of shares.

− The current Policy for post-employment shareholding requires 200% of salary to be held

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

market best practice.

• Other Policy elements:

− The recruitment and leaver policies have been simplified and aligned to normal market

practice, and to remove the ability for the bonus earned for the year of departure and

the preceding year to be paid wholly in cash (with no deferral).

Determining the Remuneration Policy

The Committee is responsible for the development, implementation, and review of the

Directors’ Remuneration Policy. In addressing this responsibility, the Committee works

withmanagement and external advisers to develop proposals and recommendations.

TheCommittee considers the source of information presented to it, takes care to understand

the detail and ensures that independent judgement is exercised when making decisions.

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MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Remuneration Policy

When setting the Remuneration Policy, the Committee considered the Company’s strategic

objectives over both the short and the long term, the external market, market best practice

and pay across the Group. The Policy has been tested against the six factors listed in Provision

40 of the UK Corporate Governance Code:

• Clarity – the Policy is as clear as possible and is described in straightforward concise terms

to shareholders and our people in this report.

• Simplicity – remuneration structures are as simple as possible and market typical, whilst at

the same time incorporating the necessary structural features to ensure a strong alignment

to performance and strategy, minimising the risk of rewarding failure.

• Risk – The Committee monitors the bonus and LTIP to take into account risk levels. Pay is

focused on long-term performance through the LTIP, mandatory bonus deferral, recovery

provisions and in-employment and post-employment shareholding requirements. To avoid

conflicts of interest, Committee members are required to disclose any conflicts or potential

conflicts ahead of Committee meetings. No Executive Director or other member of

management is present when their own remuneration is under discussion.

• Predictability – elements of the Policy are subject to caps. Examples of how remuneration

varies depending on performance is set out in the scenario charts (set out on page 85).

TheCommittee may exercise its discretion to adjust Directors’ remuneration if a formula-

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.

The pay alignment across the business

The Company aims to provide a remuneration package that is market competitive, complies

with any statutory requirements and is applied fairly and equitably across the wider employee

population. Where remuneration is not determined by statutory regulation, the Company

operates the same core principles as it does for Executive Directors, namely:

• We remunerate people in a manner that allows for stability of the business and the

opportunity for sustainable long-term growth.

• We seek to remunerate fairly and consistently for each role with due regard to the

marketplace, internal consistency and the Group’s ability to pay.

Our bonus schemes have evolved to ensure all our employees have the opportunity to

beappropriately rewarded for the achievement of our core pub and corporate goals.

Performance measures and targets are aligned to our vision of ‘Pubs to be proud of’ and

cascade as appropriate, from Executive Directors down to pub level.

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

encouraged and shareholding requirements apply to the Executive Committee and Leadership

Group. We also encourage long-term employee engagement through the offer of an all-

employee share plan to all employees of the Group who meet a minimum service requirement.

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CORPORATE GOVERNANCE REPORT CONTINUED

Remuneration Policy

How employee views are taken intoaccount

Salary, benefits and performance-related rewards provided to employees are taken into

account when setting policy for Executive Directors’ remuneration. We engage with our

employees through Peakon monthly surveys and workforce engagement sessions.

In October of each year a paper is submitted to the Committee by the HR Director summarising

the outcome of any annual reviews made to the wider workforce (which includes all employees

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’

remuneration effective from the start of October for the following 12 months.

In addition, and where relevant, a similar paper is submitted in October covering the decisions

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

for Executive Directors.

Our monthly engagement survey reaches allofour employees and our workforce engagement

sessions are attended by at least one Non-executive Director. The Committee engaged directly

with employees to explain the alignment of pay across the Group and the key elements of the

Directors’ Remuneration Policy.

How shareholder views are taken into account

In considering the operation of the Remuneration Policy, the Remuneration Committee will

take into account the published remuneration guidelines and specific views of shareholders

and proxy voting agencies.

The Committee is committed to open and transparent dialogue with shareholders

andwelcomes feedback on Executive and Non-executive Directors’ remuneration.

TheRemuneration Committee will consult with our larger shareholders, where considered

appropriate, regarding changes to the operation of the Remuneration Policy and when the

Remuneration Policy is being reviewed and brought to shareholders for approval. Furthermore,

the Remuneration Committee will consider specific remuneration concerns or matters raised at

any time by shareholders.

During 2022, we engaged with our largest investors as well as Institutional Shareholder Services

(ISS), Investment Association (IA) and Glass Lewis, to understand their views on our proposed

new Policy and the proposed implementation in 2022/23. The outcome of this shareholder

consultation is set out in the Chair’s Statement.

Aims

The Policy is designed to ensure that Executive Directors are provided with sufficient

remuneration to motivate each individual with incentives that are aligned to strategy and

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

provide an appropriate balance between motivating and rewarding Executive Directors to

deliver stretching but sustainable performance, without encouraging excessive risk taking.

The table below and the accompanying notes describe the Remuneration Policy for Executive

Directors.

Base salary

Purpose and

link tostrategy

Core element of fixed remuneration, reflecting the individual’s role and

experience.

Operation Usually reviewed annually and fixed for 12 months commencing 1 October.

Whilst Executive Directors are contractually entitled to an annual review of their

salary, there is no entitlement to an increase as a result of this review.

Salary levels are determined by the Committee taking into account a range of

factors including:

• role, experience and performance;

• underlying performance of the business;

• alignment with workforce;

• prevailing market conditions; and

• external benchmarks for similar roles at comparable companies.

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

very carefully and such increases may be awarded where there is a reason to do

so taking into account relevant factors. These circumstances may include but are

not limited to:

• increase in scope and responsibility;

• development and performance in the role (including that if a newly

appointed Executive Director’s salary is positioned below a market rate it may

be increased to a market rate over such period as the Committee considers

appropriate); or

• a salary falling significantly below market positioning.

Performance

metrics

Not applicable, although the individual’s contribution and overall performance

are considerations in determining the level of any salary increase.

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CORPORATE GOVERNANCE REPORT CONTINUED

Remuneration Policy

Benefits

Purpose and

link tostrategy

Ensures the overall package is competitive.

Operation Executive Directors receive benefits in line with market practice which include a

car allowance, private medical insurance and life assurance.

Other benefits may be provided based on the role and individual circumstances.

These may include, for example, relocation and travel allowances.

Opportunity Set at a level which the Committee considers appropriate against the market

and provides a sufficient level of benefit based on individual circumstances.

Performance

metrics

Not applicable.

Retirement benefits

Purpose and

link tostrategy

Contributing to savings to deliver appropriate income in retirement.

Operation Executive Directors are eligible to participate in the defined contribution pension

scheme (or such other pension plan as may be deemed appropriate).

In appropriate circumstances, Executive Directors may take a salary supplement

instead of contributions into a pension plan.

Opportunity Pension contributions (or cash allowance) will not exceed the pension

contributions available to the majority of the workforce (which is currently

3%ofsalary).

Performance

metrics

Not applicable.

Annual bonus

Purpose and

link tostrategy

Rewards performance against targets which support the strategic direction of

the Group. Compulsory deferral into shares aligns Executive Directors with

shareholder interests and provides a retention element.

Operation Performance measures and applicable targets are set annually and any payout

is determined by the Committee after the period end, based on performance.

The Committee has discretion to vary the bonus payout should any formulaic

output not reflect the Committee’s assessment of overall business performance

ornot be appropriate in the context of circumstances that were unexpected or

unforeseen at the start of the bonus year.

One third of any bonus paid (after tax) will be used to purchase shares which the

Executive Director must normally hold for three years.

Recovery provisions apply, as referred to below.

Opportunity The maximum annual bonus opportunity is 125% of base salary.

Performance

metrics

Performance measures are determined each year reflecting the business

priorities that underpin Group strategy.

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

thebonus opportunity may be based on non-financial objectives such as the

delivery of strategic/individual/ESG objectives.

No more than 20% of the relevant portion of the annual bonus is payable for

delivering a threshold level of performance, and no more than 50% is payable for

delivering a target level of performance (where the nature of the performance

metric allows such an approach).

There is usually straight-line vesting between the threshold and target

performance levels and between target and maximum performance levels.

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CORPORATE GOVERNANCE REPORT CONTINUED

Remuneration Policy

Long Term Incentive Plan (‘LTIP’)

Purpose and

link tostrategy

Incentivises Executive Directors to deliver against the Group’s strategy over the

longer term. Long-term performance targets and share-based remuneration

support the creation of sustainable shareholder value.

Operation Awards of conditional shares or nil-cost options can be made with vesting

dependent on the achievement of performance conditions, normally over

athree-year performance period. Vested LTIP awards are normally subject to

anadditional holding period of two years before being released.

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

Option’). This linking arrangement gives the participant and the Group the

opportunity to benefit from the tax treatment available in respect of tax-

advantaged options without increasing the pre-tax value delivered to the

participant.

The Committee has discretion to vary the formulaic vesting output applying to

any LTIP award where it believes the outcome does not reflect the Committee’s

assessment of overall business performance or is not appropriate in the context of

circumstances that were unexpected or unforeseen at the date of grant.

LTIP Awards may (where permissible) carry a right to a separate payment (in cash

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

option). The payment may assume the reinvestment of the dividends.

Recovery provisions apply as referred to below.

Long Term Incentive Plan (‘LTIP’) continued

Opportunity The normal maximum award size will be up to 150% of base salary in respect of

any financial year.

In exceptional circumstances the Committee reserves the right to award up to

200% of base salary in respect of any financial year.

For the reasons above, if an LTIP award is granted as a Linked Nil-Cost Option,

theshares subject to the tax-advantaged option to which it is linked will not

counttowards this limit.

Performance

metrics

The vesting of LTIP awards is subject to the satisfaction of performance targets set

by the Committee.

Performance measures will be determined by the Committee for each LTIP award

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

Committee will regularly review the performance conditions and targets to ensure

they are aligned to the Company’s strategy and remain challenging and reflective

of commercial expectations. Financial or shareholder return targets will apply to

the majority of an award.

All-employee share plan

Purpose and

link tostrategy

To provide alignment with Group employees and to promote share ownership.

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

metrics

Not applicable.

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CORPORATE GOVERNANCE REPORT CONTINUED

Remuneration Policy

Shareholding guidelines

Purpose and

link tostrategy

To provide alignment with shareholders’ interests.

Operation During employment

Executives are required to build up and retain a shareholding equivalent to 200%

of their base salary.

Until the shareholding requirement is met, Executive Directors will be required to

retain 50% of the net of tax shares they receive under any incentive plan.

Post-employment

Any Executive Director leaving the Company will be expected to retain the lower

of the shares held at cessation of employment and shares to the value of 200% of

salary, for a period of two years. The Committee will have discretion to amend

the requirement in exceptional circumstances.

Opportunity Not applicable.

Performance

metrics

Not applicable.

Recovery provisions (malus and clawback)

Annual bonus awards and LTIP awards are subject to recovery provisions which may be applied

for up to two years following the payment in the case of the annual bonus, and for up to two

years following vesting in the case of an LTIP award. These provisions may be applied in the

following circumstances:

• a material misstatement of the Company’s audited financial results;

• a material failure of risk management by, or corporate failure of, the Company, any member

of the Company’s group (‘Group’) or a relevant business unit;

• the Remuneration Committee determining that the relevant Participant or former Participant

has been guilty of serious misconduct;

• serious reputational damage to the Company, any Group member or a relevant business unit

as a result of the Participant’s misconduct or otherwise;

• an error in assessing a Performance Condition applicable to the Award; and

• 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.

Non-executive Director fees

Purpose and

link tostrategy

Non-executive Director fees are set at a level that reflects market conditions and

is sufficient to attract individuals with appropriate knowledge and experience.

Operation Fees are reviewed as required and amended to reflect market positioning and

any change in responsibilities.

The Remuneration Committee recommends the remuneration of the Chair to the

Board. Fees paid to Non-executive Directors are determined and approved by

the Board as a whole.

The Non-executive Directors do not participate in the annual bonus plan or any

of the Group’s share incentive plans. Non-executive Directors may be eligible

toreceive benefits such as the use of secretarial support, travel costs or other

benefits that may be appropriate (and may be reimbursed for any tax

liabilitythereon).

Fees may be payable in cash or shares.

Opportunity Fees are set taking into account the level of fees paid to Non-executive Directors

serving on boards of similar-sized UK-listed companies and the time commitment

and contribution expected for the role.

Non-executive Directors receive a basic fee and an additional fee for further

duties (for example chairing a Committee or Senior Independent Director

responsibilities or holding the position of Non-executive Director responsible

forworkforce engagement).

Performance

metrics

Not applicable.

The Committee reserves the right to make any remuneration payments and payments for loss of

office notwithstanding that they are not in line with the Policy set out above where the terms of

the payment were agreed before this Policy came into effect or, at a time when the relevant

individual was not a Director of the Company (or other person to whom this Policy applies) and,

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).

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

at the time the award is granted.

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Remuneration Policy

Explanation of performance metrics chosen

Performance measures are selected to reflect the Group’s strategy. Stretching performance

targets are set each year for the annual bonus and long-term incentive awards. In setting

these performance targets the Committee will take into account a number of different

reference points which may include the Group’s business plans and strategy and the

marketenvironment.

The Committee retains the discretion to adjust or set different performance measures or targets

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

determine that the measures are no longer appropriate, and that amendment is required so

that they achieve their original purpose.

Discretion

The Remuneration Committee can exercise discretion in a number of areas when operating

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

areas include (but are not limited to):

• the choice of participants

• the size of awards in any year (subject to the limits set out in the policy table above)

• the extent of payments or vesting in light of the achievement of the relevant performance

conditions

• determination of ‘qualifying leavers’ and the treatment of outstanding awards

(subjecttothe provisions of the scheme rules and the Remuneration Policy provisions), and

• the treatment of outstanding awards (other than tax-advantaged options on a change

ofcontrol).

Operation of share plans

The Committee may amend the terms of awards and options under its share plans in

accordance with the plan rules in the event of a variation of the Company’s share capital or a

demerger, special dividend or other similar event or otherwise in accordance with the rules of

those plans. Shares awards granted under any such plan may be settled (in whole or in part)

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

restrictionon the delivery of shares.

Illustration of application of Remuneration Policy

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

Executive Director on the basis of minimum remuneration, remuneration receivable for

performance in line with the Company’s expectations and maximum remuneration

(includingand excluding share price appreciation of 50% on the LTIP award).

In illustrating the potential reward, the following assumptions have been made:

• Minimum: Comprises fixed pay only using the salary on 1 October 2022, the benefits value

has been assumed to be equivalent to that included in the single figure calculation on

page 87 and a 3% company pension contribution.

• On-target: Fixed pay plus a bonus pay-out at 50% of maximum and the FY2022/23 LTIP

vesting at 50% of face value.

• Maximum: Comprises fixed pay and assumes full pay-out under the annual bonus and that

the FY2022/23 LTIP grant vests in full.

• Maximum performance with share price appreciation of 50%: the maximum scenario

assuming 50% share price growth on the LTIP award from the date of grant to vesting.

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CORPORATE GOVERNANCE REPORT CONTINUED

Remuneration Policy

Fixed pay Annual bonus LTIP LTIP value with 50% share price growth

100.0%

£658

48.5%

22.9%

28.6%

£1,356

32.0%

30.2%

37.8%

£2,054

26.9%

25.4%

31.8%

15.9%

£2,442

Andrew Andrea (£’000)

£3,000

£2,500

£2,000

£1,500

£1,000

£500

£0

On target

Minimum Maximum Maximum (with 50%

share price increase)

Fixed pay Annual bonus LTIP LTIP value with 50% share price growth

Hayleigh Lupino (£’000)

£1,600

£1,400

£1,200

£1,000

£800

£600

£400

£200

£0

On target

Minimum Maximum Maximum (with 50%

share price Increase)

100.0%

£421

51.0%

24.0%

25.0%

£827

34.2%

32.3%

33.5%

£1,233

29.3%

27.6%

28.7%

14.4%

£1,440

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 Marston’s and

its shareholders.

Salary Base salary will be set at a level appropriate to the role 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 125% 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 on

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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 notional notice period.

They will also be entitled to pension contributions for the duration of the

notional 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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Annual report on remuneration

This part of the Directors’ Remuneration Report sets out how we have implemented our current

Remuneration Policy during the period ended 1 October 2022. Sections in the report not

specifically stated as audited are not subject to audit.

Executive Directors

Total remuneration payable (audited)

Period ended

1October 2022

Salary

Benefits

Pension

Other

Total fixed

Bonus

Long-term

incentives

Total

variable

Total

Andrew Andrea 601,765 17,465 18,360 4,996 642,586 84,357 64,971 149,328 791,914

Hayleigh Lupino 385,310 13,478 11,603 4,996 415,387 54,075 7,660 61,735 477,122

Period ended

2 October 2021

Salary

Benefits

Pension

Total fixed

remuneration

Bonus

Long-term

incentives

Total variable

remuneration

Total

Andrew Andrea 392,928 14,719 70,727 478,374 0 0 0 478,374

Ralph Findlay 586,682 19,327 105,603 711,612 0 0 0 711,612

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.

2. Private medical insurance benefits are unchanged but premiums may vary from year to year. Benefits include a

car allowance, private medical insurance and life assurance.

3. Andrew Andrea and Hayleigh Lupino received a pension contribution of 3% of salary.

4. This figure relates to the grant of Sharesave options during the reporting year.

Annual bonus 2021/22

Stretching targets were set at the start of 2021/22. Targets were based on a balanced mix of

financial (EBITDA and FCF) and strategic measures (performance vs Peach market tracker,

Reputation scores and employee engagement).

During the year, the Remuneration Committee reviewed the operation of the Peach market

tracker. Following that review, at the March 2022 meeting, the Committee used its discretion

toreplace the Peach market tracker with a Group sales measure with equivalently stretching sales

targets. As part of a balanced scorecard, Group sales better reflects overall financial performance.

As noted above, having made a strong start to the year, with promising levels of Christmas

bookings, the business was heavily impacted by the trading restrictions imposed as a

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

rendered unachievable.

Recognising the need to maintain motivation within our pub, operational and support teams,

the Committee concluded that it would be in shareholders’ interests if the targets for both

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

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

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

were assessed over the full 12 months. As a result, the bonus opportunity for the year was

reduced from 100% of salary to 76.66% of salary.

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

focused on our strategic measures. The adjustments to the bonus were aligned across the

Group and the adjusted target ranges are summarised below:

Performance metric Weighting

Threshold

(20% of

maximum)

Target

(50% of

maximum)

Maximum

(100% of

maximum) Actual % of salary

Group EBITDA

Previous target

(applicable for

12 months)

30%

£170.81m £179.80m £189.00m £159.60m

Target adjusted

by the

Committee

applying for

periods 5 –12 £122.60m £129.10m £135.50m £112.30m

Group free

cash flow

Previous target

(applicable for

12 months)

40%

£60.42m £63.60m £66.84m £55.50m

Target adjusted

by the

Committee

applying for

periods 5 –12 £45.30m £47.70m £50.10m £36.40m

Group sales 10% £577.90m £608.30m £639.30m £563.10m 0%

Reputation score 10% 575 600 650 731 10%

Employee engagement 10% 7.5 8.0 8.2 7.8 4%

Bonus outturn 14%

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Annual report on remuneration

The annual bonus outcomes for Executive Directors during the year are shown below.

Asreported in the Annual Statement, on page 72, our business was impacted by economic

volatility, rising costs, supply chain challenges and the cost-of-living crisis. Whilst performance

did not reach threshold on the financial measures, our people have worked hard to deliver

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

arerequired, and that the outcome is reflective of underlying performance. The bonus is

payable in cash.

Annual bonus outcome

Executive Director

% salary (out of reduced

maximum 76.66%

ofsalary)

Value

Andrew Andrea 14% 84,357

Hayleigh Lupino 14% 54,075

LTIP award vesting in respect of performance during 2021/22

The 2019/20 LTIP award was granted in December 2019, prior to the disposal of Marston’s

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

beer company would remain a part of the Group and contribute to the underlying EPS number.

The beer company profit in 2019 equated to a 5.1p contribution to the underlying EPS target. The

revised targets, ranges and outturn are shown below. NCF and relative TSR targets and ranges

were not adjusted.

The performance targets for these awards and the performance to 1 October 2022 are

shownbelow:

Performance metric Weighting

Threshold 25%

vesting

On-target

50%

vesting

Maximum

100%

vesting Actual LTIP vesting

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%

Relative TSR vs FTSE 250

(excluding Investment

Trusts) 20% Median –

Upper

quartile

Below

median 0% out of 20%

Total

40% out of 100%

of maximum

The Committee reviewed the outturn in relation to the NCF targets and was satisfied that the

pay-out was justified for the following reasons:

• As a result of the beer company disposal, the Group holds a 40% investment in CMBC i.e.,

the outcome of the disposal was not purely a substantial cash inflow.

• Considering the safeguards that were discussed at the time of the award, the NCF outturn

has not resulted in the underinvestment in our estate, with the capex programme now

ensuring that every pub is refreshed at least once every 4 years, with the previous cycle

being longer.

• Additionally, the transaction and resulting cash inflow underpinned the financial stability

of the Group during the pandemic and ensured we could avoid the potential

requirement to raise equity.

• Awards were granted in December 2019, prior to the onset of the global pandemic (i.e.,

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

performance over the performance period. As such, the awards will vest in December 2022,

with the shares subject to a two-year holding period.

The 2019 awards will therefore vest as follows:

Executive Director

Number of

granted

Number of

shares due

to vest

Total

Andrew Andrea 372,124 148,849 64,971

Hayleigh Lupino

43,875 17,550 7,660

1. The share price was £1.294 at the time of grant of the award, compared to the three-month average share price

of £0.436 to 1 October 2022. Therefore, none of the value of the award is due to share price appreciation.

2. Value of shares based on a three-month average share price of £0.436 to 1 October 2022. This value will be

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.

LTIP awards granted during 2021/22

LTIP awards were granted on 6 December 2021 as APSP awards. The APSP awards comprised

three elements: (i) an HMRC Tax Qualifying Option over shares with a total value at the date

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)

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Annual report on remuneration

The details of the awards granted are as follows:

Percentage

of salary

Number of

nil-cost

options

granted

Number

ofTax

Qualifying

options

granted

Face value

at grant

% of award

vesting at

threshold

Performance

period

Holding

period

Andrew Andrea 125% 1,078,580 44,742 730,946 25%

Financial

periods

2021/22–

2023/2024

Financial

periods

2024/25–

2025/26

Hayleigh Lupino 125% 675,336 44,742 468,555 25%

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.

The awards will vest subject to the satisfaction of performance metrics set out below:

Weighting

Threshold

25%

vesting

On-target

50%

vesting

Maximum 100%

vesting

Underlying PBT (in FY 2023/24) 40% £63.65m £67.0m £68.67m

NCF (cumulative over three years) 40% £125m £150m £182m

TSR v FTSE 250 (excluding Investment Trusts) 20% Median – Upper quartile

1. Straight-line vesting applies between threshold, on-target and maximum performance.

All-employee scheme interests granted during the year

During the year, the CEO and CFO received an award under the Company’s Sharesave

Scheme. The savings contract commenced on 1 September 2022; further details are

shownbelow:

Number of

options

granted

Exercise

price

Face value

at grant

% of award

vesting at

threshold

Date on which

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.

Non-executive Directors

Total remuneration (Chair and Non-executive Directors) (audited)

Base Fee

Committee

Chair

SID

2021/22

Total

2020/21

Total

Bridget Lea 55,500 55,500 54,000

Octavia Morley 55,500 10,000 10,000 75,500 62,750

Matthew Roberts 55,500 10,000 65,500 61,500

William Rucker 206,000 206,000 200,000

Nick Varney 13,875 13,875 –

1. The maximum authority for Non-executive Directors’ fees (in aggregate), as outlined in our Articles of

Association, is £750,000 a year, as approved by shareholders at our 2017 AGM.

Interests in ordinary shares (audited)

The beneficial interests of the Non-executive Directors and their connected persons in the

share capital of the Company are shown below:

As at

01.10.22

As at

02.10.21

Bridget Lea 50,000 50,000

Octavia Morley 25,000 25,000

Matthew Roberts 25,000 25,000

William Rucker 400,000 200,000

Nick Varney 227,902 −

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Annual report on remuneration

Payment for loss of office (audited)

No payments were made for loss of office.

Payments to past Directors (audited)

No payments were made to past Directors other than as disclosed in the 2020/21 annual report

in relation to Ralph Findlay’s continuing private medical insurance.

Total shareholder return chart and CEO remuneration history

This graph shows the value, at 1 October 2022, of £100 invested in the Company on 29 September

2012 compared to the value of £100 invested in the FTSE All Share Index. The FTSE All Share Index

has been selected as a comparator because the Company is a member of that index.

The intermediate points show the value at the intervening financial period ends.

28 Sep

2012

100

150

200

5 Oct

2013

4 Oct

2014

3 Oct

2015

1 Oct

2016

30 Sep

2017

29 Sep

2018

28 Sep

2019

3 Oct

2020

2 Oct

2021

Marston’s TSR

1 Oct

2022

FTSE All Share TSR

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

opportunityis also shown.

Name

Total

remuneration

Annual

bonus (% of

maximum)

LTIP vesting

(% of

maximum)

2021/22 Andrew Andrea

791,914 14% 40%

2020/21 Ralph Findlay

711,612 0% 0%

2019/20 Ralph Findlay 592,423 0% 0%

2018/19 Ralph Findlay 722,432 0% 0%

2017/18 Ralph Findlay 807,665 17.7% 0%

2016/17 Ralph Findlay 803,303 20% 0%

2015/16 Ralph Findlay 1,008,320 40% 21%

2014/15 Ralph Findlay 876,788 40% 0%

2013/14 Ralph Findlay 1,121,294 25% 41.9%

2012/13 Ralph Findlay 937,312 0% 44.2%

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Annual report on remuneration

Change in remuneration of Directors’ and employee pay

The table below shows the percentage change in the Directors’ salary, benefits and annual

bonus over the last three financial years. This is then compared to the wider workforce. It was

agreed that all employees of the Group should be included in the comparison. Marston’s PLC

does not have any direct employees, as all employees within the Group are employed by a

wholly owned subsidiary company, Marston’s Trading Limited.

Wider

workforce

Andrew

Andrea

Hayleigh

Lupino

William

Rucker

Bridget

Lea

Octavia

Morley

Matthew

Roberts

Nick

Varney

Salary/

fees

2021/22 and

2020/21 11.1% 53%

N/A 3% 2.7% 8.7% 6.5% N/A

2020/21 and

2019/20 2.9% 2% N/A 0% 0% 0% 0% N/A

2019/20 and

2018/19 6.4% 2% N/A 0% N/A N/A 0% N/A

Taxable

benefits

2021/22 and

2020/21

See

note 5 18.7% N/A – – – – –

2020/21 and

2019/20

See

note 5 5.8%

N/A – – – – –

2019/20 and

2018/19

See

note 5 (6.3%) N/A – – – – –

Annual

bonus

2021/22 and

2020/21

See

note 7 100% N/A – – – – –

2020/21 and

2019/20

See

note 7 0% N/A – – – – –

2019/20 and

2018/19

See

note 7 0% N/A – – – – –

Notes:

1. Salary/fee reviews for the Executive Directors, Non-executive Directors, and salaried workforce are effective

1October. However, whilst Marston’s accounting reference date is 30 September, the Group reports on a

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

change to salary is calculated by reference to the mean of employee pay. The majority of pub-based

employees have their remuneration set by statute rather than the market.

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

Director to the Board with effect from 1 July 2022.

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

remuneration when he was a Director.

4 Andrew Andrea’s percentage increase from 2020/21 to 2021/22 reflects his appointment as CEO (having

previously been CFO) and the responsibilities, and associated level of benefits, that accompany that position.

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,

where applicable.

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

salaries paid from August 2020. The car allowance element of the benefits policy was subject to the 20%

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.

7. No bonuses were payable in respect of 2020/21, or the prior period, based on Group performance, therefore

acomparison with bonuses earned in respect of 2021/22 is not meaningful. Bonuses and other discretionary

payments were earned by a number of employees, within the wider workforce, during the prior period, details

of which are set out on pages 59 to 60 of the 2020 Annual Report and Accounts.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Annual report on remuneration

CEO pay ratio

The tables below show how the CEO’s single total figure of remuneration compares with the

equivalent figures for UK employees whose remuneration was ranked at the 25th percentile,

50th percentile, and 75th percentile.

Year Method

25th

percentile

pay ratio

50th

percentile

pay ratio

75th

percentile

pay ratio

2021/22 Option B 46:1 45:1 40:1

2020/21 Option B 47:1 44:1 43:1

2019/20 (based on contractual salary and benefits) Option B 48:1 45:1 41:1

2019/20 (reflecting voluntary reduction in salary and

benefits) Option B 40:1 37:1 34:1

Note:

Andrew Andrea was appointed CEO from 3 October 2021. As a result, the 2021/22 pay ratio is assessed against Andrew

Andrea’s total remuneration. Prior years are assessed against Ralph Findlay’s total remuneration who stepped down from the

Board 2 October 2021.

Component CEO £

25th

percentile

50th

percentile

75th

percentile

Base salary 601,765 17,108 17,472 19,601

Total remuneration 791,914 17,108 17,472 19,601

We have chosen Option B which uses the hourly rate data from the most recent Gender Pay

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

any variances in the total remuneration package for employees sitting at each of the percentiles

as, for example, not all employees contribute to a pension scheme or receive a bonus. In order

to determine the full-time equivalent salary component for the representative employees,

thehourly rate was multiplied by 35 hours to calculate the full-time equivalent salary. The

calculations for the relevant representative employees were performed as at 5 April 2022.

Sensitivity analysis was performed around the 25th, median and 75th percentile employees

toensure that they were reasonably representative.

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

contractual salary and benefits for 2019/20. There has not been a significant change to the CEO

pay ratio over the last three years (when compared to the contractual salary and benefits).

A substantial proportion of the CEO’s total remuneration is performance-related and delivered

in shares. The ratios will depend significantly on the CEO’s annual bonus and long-term

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.

Relative importance of spend on pay

The table below demonstrates the relative importance of the Group’s expenditure on total

employee pay compared to dividend payments to shareholders.

2021/22 2020/21 % change

Dividend payments

£0m £0m –

Total employee pay

£214.0m £186.7m 14.6%

1. No distributions by way of share buybacks were made to shareholders during the 2021/22 or 2020/21

financialyears.

2. Excluding non-underlying items.

3. The increase in total employee pay is predominately due to the increase in the NMW during the year, and the

additional uplifts applied to the NMW rates for all age groups by the Company.

External appointments for Executive Directors

Executive Directors are permitted to take up external appointments, subject to approval by

the Board, and are allowed to retain any fees received.

Directors’ share interests (audited)

Each Executive Director is required to build and retain a shareholding with a value equal to

two times salary. To achieve these holdings under the current policy, Directors are required

toretain any vested shares from the LTIP, net of tax, until the guidelines are satisfied. Under the

proposed policy, Executive Directors will be required to retain 50% of the net of tax shares they

receive under the annual bonus and LTIP. Shares subject to vested LTIP awards which are in a

holding period count towards this guideline (on a net of assumed tax basis) and deferred

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Annual report on remuneration

Executive Directors’ share interests as at 1 October 2022

Shares owned outright Share options

Shareholding

requirement

(%of salary)

Actual %

ofsalary

holdingAt 01.10. 22 At 02.10.21

Not subject to

performance

Subject to

performance

Andrew Andrea 390,773 352,773 40,909 2,005,741 200% 84%

Hayleigh Lupino 104,629 – 71,038 869,406 200% 18%

1. The table above includes the holdings of persons connected with each of the Directors.

2. All scheme interests are structured as nil-cost or tax-advantaged options.

3. Of the 71,038 share options, 40,909 are Sharesave options.

In assessing the extent to which the guidelines are satisfied, shares are valued at the end of the

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.

Executive Directors’ interests in share options as at 1 October 2022

Grant

date

Brought

forward

02.10.21 Granted

Exercised/

vested

Cancelled/

lapsed

Carried

forward

01.10.22

Exercise

price

Vesting

date

Release

date

Andrew

Andrea

LTIP 2018

473,033 – – 473,033 0 N/A 2021 N/A

2019

372,124 – – – 372,124 Nil 2022 2024

May

2021

510,295 – – 510,295 Nil 2024 2025

Dec

2021

– 1,078,580 – – 1,078,580 Nil 2024 2026

– 44,742 – – 44,742 £0.6507 2024 2026

Sharesave June

2022 – 40,909 – – 40,909 £0.44 2025 N/A

Grant

date

Brought

forward

02.10.21 Granted

Exercised/

vested

Cancelled/

lapsed

Carried

forward

01.10.22

Exercise

price

Vesting

date

Release

date

Hayleigh

Lupino

LTIP 2018

52,124 – – 52,124 0 N/A 2021 N/A

2019

43,875 – – – 43,875 Nil 2022 2024

May

2021

75,324 – – – 75,324 Nil 2024 2025

Dec

2021

– 675,336 – – 675,336 Nil 2024 2026

– 44,742 – – 44,742 £0.6507 2024 2026

Sharesave June

2022 – 40,909 – – 40,909 £0.44 2025 N/A

Deferred

bonus

May

2021 30,129 – – – 30,129 Nil 2024 N/A

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’

Remuneration Report.

3. The performance conditions applying to the 2019/20 LTIP are set out on page 67 of the 2020 Directors’

Remuneration Report.

4. The performance conditions applying to the 2020/21 LTIP are set out on page 67 of the 2021 Directors’

Remuneration Report.

5. The performance conditions applying to the 2021/22 LTIP are set out on page 67 of the 2021 Directors’

Remuneration Report.

6. The exact release date will be confirmed when the date of the relevant preliminary results announcement is

known and the associated closed period ends.

There have been no changes to the Directors’ share interests and interests in share options

between 1 October 2022 and 5 December 2022 (being the latest practical date prior to the

date of this report).

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

CORPORATE GOVERNANCE REPORT CONTINUED

Annual report on remuneration

Name

Base salary

2021/22

Base salary

2022/23

Andrew Andrea

602,550

620,626

Hayleigh Lupino 386,250 397,838

Note:

The majority of the wider workforce (pub-based employees) have their remuneration set by statute rather than the market.

Annual bonus

The annual bonus opportunity for Executive Directors will be 100% of salary, in line with the

previous year. Performance measures remain unchanged and are aligned to our strategic

objective and core pub and corporate goals.

Strategic pillar

Performance

measure

% Weighting for

2022/23

We will grow Group EBITDA 30%

Free cash flow 20%

Group sales 20%

We are guest obsessed

Reputation

score 15%

We raise the bar

Employee

engagement 15%

The Directors consider that the annual bonus targets for 2022/23 financial year are

commercially sensitive. The Committee will continue to disclose how the bonus pay-out

delivered relates to performance against the targets in next year’s report.

One third of any bonus paid will be deferred into shares which must be held for three years.

LTIP

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

125% to 150% for the CEO combined with challenging and stretching performance targets to

drive top-end performance.

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

150% back to 125% of salary, with the same proportionate scale back for the CFO, whose grant

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.

The extent to which the LTIP awards will vest will be determined by the performance measures

listed below.

Weighting

Threshold 25%

vesting

Maximum 100%

vesting

Underlying Profit Before Tax in FY 2024/25 30% £72.0m £87.0m

Net Cash Flow (three-year aggregate) 30% £130.0m £164.0m

Return on Capital Employed (three-year average) 20% 6.5% 7.3%

Relative Total Shareholder Return vs FTSE250 (excl.

Investment Trusts) 20% Median Upper quartile

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

our overall profitability and shareholder return.

The Committee is comfortable that these targets provide an appropriate level of stretch and

represent a strong link between pay and performance.

Non-executive Director remuneration

A 3% increase will be applied to the base fee, and additional fees, for Non-executive Directors

and the Chair’s fee. The fees that will apply from 1 October 2022 are set out below.

2022/23 2021/22

Chair’s fee £212,180 £206,000

Non-executive Director basic fee £57,165 £55,500

Additional fee for:

Chairing the Audit Committee £10,300 £10,000

Chairing the Remuneration Committee £10,300 £10,000

Senior Independent Director £10,300 £10,000

Approval

This Remuneration Report was approved by the Board of Directors on 7 December 2022 and

signed on its behalf by the Remuneration Committee Chair:

OCTAVIA MORLEY

CHAIR OF THE REMUNERATION COMMITTEE

7 December 2022

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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) 7.2.1, 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 63,414,851 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 150. 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

128. 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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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DTR5.

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

% of Issued

Share Capital

Fiske Nominees Limited 31,548 42.06

Mrs Heather Mabel Medlock 10,407 13.88

George Mary Allison Limited 5,500 7.33

Rulegale Nominees Limited 4,550 6.07

Mr Nathanael Peter Knowles 4,356 5.81

Mr Neil Aston and Mr Thomas Alexander Southall 2,855 3.81

Cgwl Nominees Limited 2,805 3.74

Mrs Helen Michels 2,750 3.67

Mr Richard Somerville 2,750 3.67

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 128.

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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.marstonspubs.co.uk/responsibility

Modern Slavery Statement

Our Modern Slavery Act disclosure is available on our website www.marstonspubs.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 143 to 149.

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 17 to 19. Further details are set out in the financial statements on

pages 108 to 166. In addition, note 25 to the financial statements on pages 143 to 149 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 108 to 154 and 155 to 166 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 forecasts

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 71.

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.marstonspubs.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: 31461

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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

Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company financial

statements for each financial year. Under that law they have elected to prepare the Group

financial statements in accordance with UK-adopted international accounting standards and

applicable law and have elected to prepare the parent Company financial statements in

accordance with UK accounting standards and applicable law (UK Generally Accepted

Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the

UKand Republic of Ireland.

Under company law the Directors must not approve the financial statements unless they

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

parent Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable, relevant, reliable and prudent;

• for the Group financial statements, state whether they have been prepared in accordance

with UK-adopted international accounting standards;

• for the parent Company financial statements, state whether applicable UK accounting

standards have been followed, subject to any material departures disclosed and explained

in the financial statements;

• assess the Group and parent Company’s ability to continue as a going concern, disclosing,

as applicable, matters related to going concern; and

• 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.

Responsibility statement of the Directors

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting

standards, give a true and fair view of the assets, liabilities, financial position and profit or

loss of the Company and the undertakings included in the consolidation taken as a whole;

and

• the Strategic Report/Directors’ Report includes a fair review of the development and

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

uncertainties that they face.

We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and

understandable and provides the information necessary for shareholders to assess the Group’s

position and performance, business model and strategy.

Disclosure of information to Auditor

The Directors who held office at the date of approval of this Directors’ Report confirm that,

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

a Director to make themselves aware of any relevant audit information and to establish that

the Company’s Auditor is aware of that information.

ANDREW ANDREA

CHIEF EXECUTIVE OFFICER

7 December 2022

HAYLEIGH LUPINO

CHIEF FINANCIAL OFFICER

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

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 audit

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:

Group financial statements as a whole

£12.3million (2021: £9.0million)

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 

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

100

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

indicates that the Group’s and the parent Company’s ability to

continue as a going concern is dependent on the ability to achieve

further covenant waivers or amendments if required.

These events and conditions, along with the other matters

explained in note 1, constitute a material uncertainty that may

cast significant doubt on the Group’s and the parent Company’s

ability to continue as a going concern.

Our opinion is not modified in respect of this matter.

There is judgement involved in the Directors’ conclusion that risks

and circumstances described in note 1 to the financial statements

represent a material uncertainty over the ability of the Group and

the parent Company to continue as a going concern for a period of

at least a year from the date of approval of the financial statements.

Clear and full disclosure of the facts and the Directors’ rationale for

the use of the going concern basis of preparation, including that

there is a related material uncertainty, is a key financial statement

disclosure and so was the focus of our audit in this area. Auditing

standards require that to be reported as a key audit matter.

• Funding Assessment: We inspected correspondence with

CreditProviders and board minutes during the period and

afterperiod-end to the date of authorisation of the Annual

Report toidentify any indications that Credit Providers may

notcontinue to support the Company through covenant

amendments. Wenoted that the directors had not identified

atechnical default in their initial going concern assessment,

therefore had not taken into account a risk in relation to this

respect and we requested that the directors include additional

risks in their assessment. However as noted in Note 35,

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).

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

101

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 m i ll io n

Upwards revaluation: £75.1 million;

2021: downwards £100.5 million)

(Parent company - £192.7; 2021:

£172.0 mil lion

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 valuer’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).

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

102

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

(£260.3 million; 2021: £277.4 million)

Refer to page 71 Audit Committee Report, page 122 accounting

policy and page 138 financial disclosures.

Forecast-based assessment

The Group and Parent company hold an investment in associate

named Carlsberg Marston’s Brewing Company (‘CMBC’). The

investment is significant and at risk of impairment due to the cost

ofliving crisis and high inflation impacting the brewing sector.

Theestimated recoverable amount is subjective due to the

inherentuncertainty involved in forecasting and discounting

futurecashflows.

The effect of these matters is that, as part of our risk assessment,

we determined that the valuation of investment in CMBC 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. In conducting our final audit work, we

concluded that reasonably possible changes to the value in use

ofthe investment in CMBC would not be expected to result in

material impairment.

Our procedures included:

• Assessing component audit: We assessed the work performed

bythe associate audit team on the in scope component and

considered the results of that work on the associate’s

investmentvalue;

• Historical comparisons: We evaluated the historical accuracy of

management’s forecasting against actual results in the period.

• Our sector experience: We compared management’s discount

rate with our own calculation of the discount rate based on our

valuations experience and knowledge of the sector.

• Sensitivity analysis: We evaluated the appropriateness and

likelihood of management’s sensitivities and their impact of

theoverall impairment test outcome and performed our own

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

Group total assets £2,522.7 million

(2021: £2,467.9 million)

Group materiality

£12.3 million (2021: £9.0 million)

Total Assets

£0.6 million

Misstatements reported to the Audit Committee (2021: £0.6 million)

Group materiality

£5.5 million

Materiality applied to the audit of Marston’s sole associate, Carlsberg Marston’s

Brewing Company Limited (‘CMBC’) (2021: £5.6 million)

£9.2 million

Whole financial statements performance materiality (2021: £6.8 million)

£12.3 million

Whole financial statements materiality (2021: £9 million)

Group revenue

Full scope for Group audit purposes 2022

100%

(2021 10 0%)

Group profit before tax

100%

(2021 10 0%)

Group total assets

100%

(2021 10 0%)

Full scope for Group audit purposes 2021

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

103

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

104

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED

5. GOING CONCERN BASIS OF PREPARATION

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

concluded that the Group and the Company’s financial position means that this is realistic for at

least a year from the date of approval of the financial statements (‘the going concern period’).

As stated in section 2 of our report, they have also concluded that there is a material uncertainty

related to going concern.

An explanation of how we evaluated management’s assessment of going concern is set out in

section 2 of our report.

Our conclusions based on this work:

• We consider that the Directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate;

• We have nothing material to add or draw attention to in relation to the Directors’ statement

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

ability to continue to use that basis for the going concern period; and

• The related statement under the Listing Rules set out on page 99 is materially consistent with

the financial statements and our audit knowledge.

6. FRAUD AND BREACHES OF LAWS AND REGULATIONS –

ABILITY TO DETECT

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (‘fraud risks’) we assessed events or

conditions that could indicate an incentive or pressure to commit fraud or provide an

opportunity to commit fraud. Our risk assessment procedures included:

• Enquiring of Directors, the Audit Committee, internal audit and inspection of policy

documentation as to the Group’s/Company’s high-level policies and procedures to prevent

and detect fraud, including the internal audit function, and the Group’s/Company’s

channel for ‘whistleblowing’, as well as whether they have knowledge of any actual,

suspected or alleged fraud.

• Reading board, Audit Committee and remuneration committee minutes.

• Considering remuneration incentive schemes and performance targets.

• Using analytical procedures to identify any unusual or unexpected relationships.

• Considering the existence of any significant unusual transactions.

We communicated identified fraud risks throughout the audit team and remained alert to any

indications of fraud throughout the audit.

As required by auditing standards, we perform procedures to address the risk of management

override of controls, in particular the risk that Group and component management may be in a

position to make inappropriate accounting entries and the risk of bias in accounting estimates

and judgements such as the valuation of the estate, valuation of derivatives and pension

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

revenue contains no significant judgements, and is comprised of a large number of small, simple

transactions that are received in cash or credit card receivables at the point of sale. Therefore,

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.

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

management controls. Refer to page 72 of the Audit Committee report.

We performed procedures including:

• Identifying journal entries to test based on risk criteria and comparing the identified entries

to supporting documentation. These included journal entries made to unusual accounts

related to revenue, cash and loans and borrowings.

Identifying and responding to risks of material misstatement due to non-

compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material

effect on the financial statements from our general commercial and sector experience, through

discussion with the Directors and other management as required by auditing standards and

discussed with the Directors and other management the policies and procedures regarding

compliance with laws and regulations.

We communicated identified laws and regulations throughout our team and remained alert

to any indications of non- compliance throughout the audit.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect the financial statements

including financial reporting legislation (including related companies legislation), distributable

profits, pensions legislation and taxation legislation, and we assessed the extent of compliance

with these laws and regulations as part of our procedures on the related financial

statementitems.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

105

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED

6. FRAUD AND BREACHES OF LAWS AND REGULATIONS –

ABILITYTODETECT CONTINUED

Secondly, the Group is subject to many other laws and regulations where the consequences

ofnon-compliance could have a material effect on amounts or disclosures in the financial

statements, for instance through the imposition of fines or litigation or the loss of the Group’s

licence to operate. We identified the following areas as those most likely to have such an effect:

the Pubs Code, health and safety, GDPR compliance, anti-bribery, employment law, Payment

Card Industry compliance, money laundering, environmental protection, consumer rights,

misrepresentation, market abuse legislation and certain aspects of company legislation

recognising the nature of the Group’s activities. Auditing standards limit the required audit

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,

ifany. Therefore if a breach of operational regulations is not disclosed to us or evident from

relevant correspondence, an audit will not detect that breach.

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.

Context of the ability of the audit to detect fraud or breaches of law or regulation

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

planned and performed our audit in accordance with auditing standards. For example, the

further removed non-compliance with laws and regulations is from the events and transactions

reflected in the financial statements, the less likely the inherently limited procedures required by

auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these

may involve collusion, forgery, intentional omissions, misrepresentations, or the override of

internal controls. Our audit procedures are designed to detect material misstatement. We are

not responsible for preventing non-compliance or fraud and cannot be expected to detect

non-compliance with all laws and regulations.

7. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE

ANNUAL REPORT

The Directors are responsible for the other information presented in the Annual Report together

with the financial statements. Our opinion on the financial statements does not cover the other

information and, accordingly, we do not express an audit opinion or, except as explicitly

stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on

our financial statements audit work, the information therein is materially misstated or inconsistent

with the financial statements or our audit knowledge. Based solely on that work we have not

identified material misstatements in the other information.

Strategic report and Directors’ report

Based solely on our work on the other information:

• we have not identified material misstatements in the strategic report and the directors’ report;

• in our opinion the information given in those reports for the financial period is consistent with

the financial statements; and

• in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration Report to be audited has been properly

prepared in accordance with the Companies Act 2006.

Disclosures of emerging and principal risks and longer-term viability

We are required to perform procedures to identify whether there is a material inconsistency

between the Directors’ disclosures in respect of emerging and principal risks and the viability

statement, and the financial statements and our audit knowledge.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

106

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED

7. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION

IN THE ANNUAL REPORT CONTINUED

Based on those procedures, other than the material uncertainty related to going concern

referred to above, we have nothing further material to add or draw attention to in relation to:

• the Directors’ confirmation within the Viability Statement (page 58) that they have carried

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 Principal Risks disclosures describing these risks and how emerging risks are identified,

and explaining how they are being managed and mitigated; and

• the Directors’ explanation in the Viability Statement of how they have assessed the prospects

of the Group, over what period they have done so and why they considered that period to

be appropriate, and their statement as to whether they have a reasonable expectation that

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

necessary qualifications or assumptions.

We are also required to review the Viability Statement set out on page 55 under the Listing

Rules. Based on the above procedures, we have concluded that the above disclosures are

materially consistent with the financial statements and our audit knowledge.

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

as subsequent events may result in outcomes that are inconsistent with judgements that were

reasonable at the time they were made, the absence of anything to report on these

statements is not a guarantee as to the Group’s and Company’s longer-term viability.

Corporate governance disclosures

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

our audit knowledge.

Based on those procedures, we have concluded that each of the following is materially

consistent with the financial statements and our audit knowledge:

• 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

necessary for shareholders to assess the Group’s position and performance, business

modeland strategy;

• the section of the annual report describing the work of the Audit Committee, including the

significant issues that the Audit Committee considered in relation to the financial

statements, and how these issues were addressed; and

• the section of the annual report that describes the review of the effectiveness of the

Group’s risk management and internal control systems.

We are required to review the part of the Corporate Governance Statement relating to the

Group’s compliance with the provisions of the UK Corporate Governance Code specified by

the Listing Rules for our review. We have nothing to report in this respect.

8. WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS ON

WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

Under the Companies Act 2006, we are required to report to you if, in our opinion:

• 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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

107

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MARSTON’S PLC CONTINUED

9. RESPECTIVE RESPONSIBILITIES

Directors’ responsibilities

As explained more fully in their statement set out on page 98, the Directors are responsible for:

the preparation of the financial statements including being satisfied that they give a true and

fair view; such internal control as they determine is necessary to enable the preparation of

financial statements that are free from material misstatement, whether due to fraud or error;

assessing the Group and parent Company’s ability to continue as a going concern, disclosing,

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

cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as

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

guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered

material if, individually or in aggregate, they could reasonably be expected to influence the

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.

10. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE

OWEOUR RESPONSIBILITIES

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3

of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might

state to the Company’s members those matters we are required to state to them in an auditor’s

report and for no other purpose. To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the Company and the Company’s members,

asabody, for our audit work, for this report, or for the opinions we have formed.

JOHN LEECH

(SENIOR STATUTORY AUDITOR)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

One Snowhill

Snow Hill Queensway Birmingham

B4 6GH

8 December 2022

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

108

GROUP INCOME STATEMENT

For the 52 weeks ended 1 October 2022

2022 2021

Note

Underlying

£m

Non-

underlying

(note 4)

£m

Total

£m

Underlying

£m

Non-

underlying

(note 4)

£m

Total

£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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

109

GROUP INCOME STATEMENT CONTINUED

For the 52 weeks ended 1 October 2022

Earnings/(loss) per share: Note

2022

2021

Basic earnings/(loss) per share 9

Total 21.7 25.7

Continuing 21.7 (20.3)

Discontinued – 46.0

Basic underlying earnings/(loss) per share 9

Total 4.3 (13.4)

Continuing 4.3 (13.6)

Discontinued – 0.3

Diluted earnings/(loss) per share 9

Total 21.4 25.7

Continuing 21.4 (20.3)

Discontinued – 46.0

Diluted underlying earnings/(loss) per share 9

Total 4.3 (13.4)

Continuing 4.3 (13.6)

Discontinued – 0.3

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

110

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the 52 weeks ended 1 October 2022

2022

£m

2021

£m

Profit for the period 137.2 162.8

Items of other comprehensive income that may subsequently be reclassified to profit or loss

Gains arising on cash flow hedges 23.9 5.9

Transfers to the income statement on cash flow hedges 17.0 19.7

Other comprehensive expense of associates (0.8) –

Tax on items that may subsequently be reclassified to profit or loss (10.2) 1.7

29.9 27.3

Items of other comprehensive income that will not be reclassified to profit or loss

Remeasurement of retirement benefits 23.3 17.5

Unrealised surplus on revaluation of properties 105.8 59.1

Reversal of past revaluation surplus (34.3) (105.0)

Tax on items that will not be reclassified to profit or loss (20.5) (12.3)

74.3 (40.7)

Other comprehensive income/(expense) for the period 104.2 (13.4)

Total comprehensive income for the period attributable to equity shareholders 241.4 149.4

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

111

GROUP CASH FLOW STATEMENT

For the 52 weeks ended 1 October 2022

Note

2022

£m

2021

£m

Operating activities

Profit for the period 137.2 162.8

Taxation 26.2 (43.5)

Net finance (income)/costs (18.0) 66.2

Depreciation and amortisation 44.2 42.7

Gain on disposal of subsidiary – (290.5)

Working capital movement 31 (31.8) (6.4)

Non-cash movements 31 (30.4) 100.6

(Decrease)/increase in provisions and other non-current liabilities (7.0) 2.3

Difference between defined benefit pension contributions paid and amounts charged (7.3) (7.0)

Dividends from associates 19.4 –

Income tax received 1.5 7.5

Net cash inflow from operating activities 134.0 34.7

Investing activities

Interest received 0.9 0.5

Sale of property, plant and equipment and assets held for sale 9.9 16.2

Purchase of property, plant and equipment and intangible assets (70.1) (46.6)

Disposal of subsidiary 8 28.2 228.0

Movement in trade loans – 0.1

Finance lease capital repayments received 2.7 1.2

Net transfer from/(to) other cash deposits 30 0.2 (1.2)

Net cash (outflow)/inflow from investing activities (28.2) 198.2

Financing activities

Interest paid (79.4) (96.3)

Swap termination costs – (19.9)

Proceeds from sale of own shares – 0.1

Repayment of securitised debt (37.4) (35.4)

Advance/(repayment) of bank borrowings 25.0 (80.1)

Net repayments of lease liabilities (8.5) (19.8)

(Repayment)/advance of other borrowings (10.0) 10.0

Net cash outflow from financing activities (110.3) (241.4)

Net decrease in cash and cash equivalents 30 (4.5) (8.5)

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

112

GROUP BALANCE SHEET

As at 1 October 2022

Note

1 October

2022

£m

2 October

2021

£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

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

113

GROUP BALANCE SHEET CONTINUED

As at 1 October 2022

Note

1 October

2022

£m

2 October

2021

£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

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

114

GROUP STATEMENT OF CHANGES IN EQUITY

For the 52 weeks ended 1 October 2022

Equity

capital

£m

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) 406.4

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 – 153.9 241.4

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) 3.1 648.1

Further detail in respect of the Group’s equity is provided in notes 28 and 29.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

115

GROUP STATEMENT OF CHANGES IN EQUITY CONTINUED

For the 52 weeks ended 2 October 2021

Equity

capital

£m

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) 248.9

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 – 177.8 149.4

Share-based payments – – – – – – – 1.2 1.2

Sale of own shares – – – – – – 0.8 (0.7) 0.1

Transfer disposals to retained earnings – – (15.1) (23.7) – – – 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 8.1

At 2 October 2021 48.7 334.0 360.5 – 6.8 (81.4) (111.1) (151.1) 406.4

Further detail in respect of the Group’s equity is provided in notes 28 and 29.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

116

NOTES

For the 52 weeks ended 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 2024

IFRS 17 Insurance Contracts

New accounting standard

1 January 2023

IAS 1 Presentation of Financial Statements

Amendments regarding the classification of liabilities

1 January 2023

Amendments regarding the disclosure of accounting policies 1 January 2023

Amendments in non-current liabilities regarding long-term debt

withcovenants

1 January 2024

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Amendments regarding the definition of accounting estimates

1 January 2023

IAS 12 Income Taxes

Amendments regarding deferred tax on leases and

decommissioning obligations

1 January 2023

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

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 cast 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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

117

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

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 cast 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 adjustments

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.

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

118

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

The Group provides accommodation to customers in its public houses and lodges. Revenue

from the provision of accommodation is recognised over the period of the customer’s stay.

Payment of the transaction price is due at the time of the customer’s stay.

The Group provides gaming machines for customers to play in its pubs. Revenue from gaming

machines is recognised when the game has been played. Payment of the transaction price is

due when the game is played.

In respect of its franchised arrangements, where the Group controls the above goods or

services before those goods or services are transferred to the customer, the associated

income is included within the Group’s revenue.

Wholesale sales – continuing

The Group sells drinks to tenants of its licensed properties. Revenue is recognised when the

Group has transferred control of the goods to the customer. This occurs when the goods have

been delivered to the customer, the customer has obtained legal title to the goods, the Group

cannot require the return or transfer of the goods and the customer has an unconditional

obligation to pay for the goods.

The Group has discretion in establishing the price of goods delivered to the customer and the

Group is responsible for fulfilling the promise to provide the specified goods.

A receivable is recognised when the goods are delivered, and payment is due in line with

each customer’s individual credit terms. These terms are all less than one year and as such no

element of financing is considered to be present.

The Group’s revenue from contracts with customers in respect of discontinued operations

comprised wholesale sales and contract services.

Wholesale sales – discontinued

The Group sold drinks to wholesalers, retailers and other pub operators. Revenue was

recognised when the Group had transferred control of the goods to the customer. This

occurred when the goods had been delivered to the customer, the customer had obtained

legal title to the goods, the Group could not require the return or transfer of the goods and the

customer had an unconditional obligation to pay for the goods.

Drinks were often sold with retrospective volume discounts based on sales over a defined

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. A refund liability was recognised within trade and other payables for the volume

discounts expected to be paid in respect of sales made prior to the balance sheet date.

Contract services – discontinued

The Group brewed and packaged drinks for customers. Revenue was recognised when the

Group had transferred control of the goods to the customer. This occurred when the goods

had been delivered to the customer, the customer had obtained legal title to the goods and

the customer had an unconditional obligation to pay for the goods.

1 ACCOUNTING POLICIES CONTINUED

The Group has applied the purchase method in accounting for the acquisition of subsidiaries.

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

initially at their fair values at the acquisition date. Acquisition costs are expensed as incurred.

The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable

net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value

of the Group’s share of the identifiable net assets of the subsidiary acquired, the difference is

recognised immediately in the income statement.

When the Group loses control of a subsidiary the carrying amounts of the assets and liabilities

of that subsidiary are derecognised at the date when control is lost. The fair value of the

consideration received is recognised alongside any investment retained in the former

subsidiary at the date that control is lost. Any resulting difference is recognised in full as a

gainor loss under IFRS 10 ‘Consolidated Financial Statements’.

The consolidated financial statements incorporate the results of Marston’s Issuer PLC and its

parent company, Marston’s Issuer Parent Limited. Marston’s Issuer PLC was set up with the sole

purpose of issuing debt secured on assets owned by the Group. Wilmington Trust SP Services

(London) Limited holds the shares of Marston’s Issuer Parent Limited under a declaration of trust

for charitable purposes. The rights provided to the Group through the securitisation give the

Group power over these companies and the ability to use that power to affect its exposure

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 consolidated financial statements they have been treated as subsidiary undertakings.

The Group’s interests in associates are accounted for using the equity method. On initial

recognition the investment in an associate is recognised at cost and the carrying amount is

subsequently increased or decreased to recognise the Group’s share of the profit or loss, other

comprehensive income and changes in equity of the associate after the date of acquisition.

The net investment in an associate is impaired and impairment losses are incurred if, and only

if, there is objective evidence of impairment as a result of events that occurred after the initial

recognition of the net investment which have an impact on the estimated future cash flows

that can be reliably estimated.

Revenue and other operating income

The Group’s revenue from contracts with customers in respect of continuing operations

comprises outlet sales and wholesale sales.

Outlet sales – continuing

The Group sells food and drink to customers in its pubs. Revenue from the sale of food and

drink is recognised when the goods are sold to the customers in the pubs. Payment of the

transaction price is due immediately when the goods are provided to the customer.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

119

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Details in respect of non-underlying

items recognised in the current and prior period

areprovided in notes 4 and 8. Material judgements in respect of the classification of non-

underlying

items in the current period related to the impairment of freehold and leasehold

properties and the interest rate swap movements. The impairment of freehold and leasehold

properties and the interest rate swap valuation movement were considered to be non-

underlying

as they were significant items that resulted primarily from movements in external

market variables rather than reflecting the underlying

trading performance of the Group.

Intangible assets

Intangible assets are carried at cost less accumulated amortisation and any impairment

losses. Intangible assets arising on an acquisition are recognised separately from goodwill

ifthe fair value of these assets can be identified separately and measured reliably.

Amortisation is calculated on a straight-line basis over the estimated useful life of the

intangible asset. Where the useful life of the asset is considered to be indefinite no annual

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

carrying value of an asset may be impaired. Any impairment of carrying value is charged to

the income statement. The useful lives of the Group’s intangible assets are:

Computer software 5 to 20 years

Property, plant, and equipment

• Land and buildings which are either freehold or are in substance freehold assets are

classed as effective freehold land and buildings. This includes leasehold land and buildings

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.

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

valuation. Leasehold land and buildings, plant and machinery and fixtures, fittings, tools

and equipment are stated at cost.

• Depreciation is charged to the income statement on a straight-line basis to provide for the

cost or valuation of the assets less their residual values over their useful lives.

• Land and buildings are depreciated to their residual values over the lower of the lease term

(where applicable) and 50 years.

• Plant and machinery and fixtures, fittings, tools and equipment are depreciated over

periods ranging from 3 to 15 years.

• 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.

1 ACCOUNTING POLICIES CONTINUED

The Group also transported and delivered goods for customers. Revenue was recognised over

time as the Group transported the goods; due to the short distances the goods were transported

this was equivalent to recognising revenue at the point when the goods were delivered to the

required location.

Revenue is recorded net of discounts, intra group transactions, VAT and excise duty relating to

the brewing and packaging of certain products.

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

for the effects of a significant financing component if it is expected that payment will be

received within one year.

Rental income

The Group also includes rent receivable from tenants of its licensed properties within revenue

from continuing operations. This income is recognised in the period to which it relates.

Other operating income

Other operating income in the prior period mainly comprised amounts receivable under the

Coronavirus Job Retention Scheme and COVID-19 assistance grants from local authorities.

These are recognised in the period to which they relate.

Operating segments

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.

Non-underlying

items

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

comparability of the Group’s results. Non-underlying

items are 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 users of the financial

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

leasehold property estate is an essential and significant area of the business, the threshold for

classification of property related items as non-underlying

is higher than other items.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

120

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

have decreased, a reversal of the loss is made if there has been a change in the estimates used

to determine the recoverable amounts since the last impairment loss was recognised. The

carrying amount of the asset is increased to its recoverable amount only up to the carrying

amount that would have resulted, net of depreciation or amortisation, had no impairment loss

been recognised for the asset in prior periods. The reversal is recognised in the income statement

unless the asset is carried at a revalued amount. The reversal of an impairment loss on a revalued

asset is recognised in other comprehensive income and increases the revaluation surplus for that

asset. However, to the extent that an impairment loss on the same revalued asset was previously

recognised in the income statement, the reversal of that impairment loss is recognised in the

income statement. The depreciation charge is adjusted in future periods to allocate the asset’s

revised carrying value, less any residual value, on a systematic basis over its remaining useful life.

There is no reversal of impairment losses relating to goodwill.

Leases

At the inception of a contract the Group assesses whether that contract is, or contains,

alease. This is the case if the contract conveys the right to control the use of an identified

assetfor a period of time in exchange for consideration. The Group has taken the practical

expedient in paragraph C3 of IFRS 16 ‘Leases’ not to reassess whether an existing contract is

orcontains a lease at the date of initial application and as such the IFRS 16 definition of a

lease has only been applied to contracts which were entered into or amended on or after

29September 2019.

The lease term is determined as the non-cancellable period of a lease together with periods

covered by an option to extend the lease if the Group is reasonably certain to exercise that

option and the periods covered by an option to terminate the lease if the Group is reasonably

certain not to exercise that option.

The Group has elected not to apply the lessee requirements of IFRS 16 to short-term leases and

leases for which the underlying asset is of low value. The lease payments for such leases are

recognised as an expense on a straight-line basis over the lease term. For all other leases

where it is the lessee the Group recognises a lease liability and a right-of-use asset at the

commencement date of the lease.

The lease liability is recognised as the present value of the lease payments discounted using

either the interest rate implicit in the lease or, where that rate cannot be readily determined,

the Group’s incremental borrowing rate. The lease payments include variable payments that

depend on an index or rate and the exercise price of a purchase option if it is reasonably

certain that it will be exercised. The lease liability is subsequently increased to reflect the

interest thereon, reduced by the lease payments made and remeasured to reflect any

reassessments or lease modifications, such as a change in future lease payments resulting

froma change in an index or rate or a change in the lease term.

1 ACCOUNTING POLICIES CONTINUED

Residual values and useful lives are reviewed and adjusted if appropriate at each balance

sheet date. The Group’s effective freehold land and buildings in respect of its pub estate are

considered to have a residual value equal to their current valuation and as such no

depreciation is charged on these assets.

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

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 such that all sites are individually

inspected every three years. Substantially all of the Group’s effective freehold land and

buildings have been valued by a third-party in accordance with the Royal Institution of

Chartered Surveyors’ Red Book. These valuations are performed directly by reference to

observable prices in an active market or recent market transactions on arm’s length terms.

Internal valuations are performed on the same basis.

For effective freehold land and buildings, revaluation losses are charged to the revaluation

reserve to the extent that a previous gain has been recorded for that effective freehold asset,

and thereafter to the income statement. Surpluses on revaluation are recognised in the

revaluation reserve, except to the extent that they reverse previously charged impairment

losses for an effective freehold asset, in which case the reversal is recorded in the income

statement.

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

value at the end of the reporting period. This is consistent with the requirements of IAS 16

‘Property, Plant and Equipment’.

Disposals of property, plant and equipment

Profit/loss on disposal of property, plant and equipment represents net sale proceeds less the

carrying value of the assets and any associated lease liabilities. Any element of the revaluation

reserve relating to the property disposed of is transferred to retained earnings at the date of sale.

Impairment

If there are indications of impairment or reversal of impairment, an assessment is made of

therecoverable amount of each significant cash generating unit, which is performed at an

individual site level. An impairment loss is recognised where the recoverable amount is lower

than the carrying value of assets, including goodwill. The recoverable amount is the higher of

value in use and fair value less costs to sell. The impairment loss is recognised in the income

statement unless the asset is carried at a revalued amount, in which case the impairment loss is

charged to the revaluation reserve to the extent that a previous gain has been recorded, and

thereafter to the income statement.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

121

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Financial instruments

The Group classifies its financial assets in one of the following two categories: at fair value

through profit or loss and at amortised cost. The Group classifies its financial liabilities in one of

the following two categories: at fair value through profit or loss and other financial liabilities.

The Group classifies a financial asset as at amortised cost if the asset is held within a business

model whose objective is to hold financial assets in order to collect contractual cash flows and

the contractual terms of the asset give rise on specified dates to cash flows that are solely

payments of principal and interest.

Financial instruments at fair value through profit or loss

Derivatives are categorised as financial instruments at fair value through profit or loss unless

they are designated as part of a hedging relationship. Contingent consideration is also

categorised as at fair value through profit or loss as it does not give rise on specified dates

tocash flows that are solely payments of principal and interest. The Group holds no other

financial instruments at fair value through profit or loss.

Financial assets at amortised cost

Financial assets at amortised cost comprise finance lease receivables, trade receivables,

other receivables, other cash deposits and cash and cash equivalents in the balance sheet

and are measured using the effective interest method.

Other financial liabilities

Non-derivative financial liabilities are classified as other financial liabilities. The Group’s other

financial liabilities comprise borrowings, trade payables and other payables. Other financial

liabilities are carried at amortised cost using the effective interest method.

Financial assets are derecognised when the rights to receive cash flows from the investments

have expired or have been transferred and the Group has transferred substantially all risks and

rewards of ownership.

It is, and has been throughout the period under review, the Group’s policy that no trading in

financial instruments shall be undertaken.

Derivative financial instruments

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

operations and its sources of finance.

Derivatives are initially recognised at fair value on the date the derivative contract is

enteredinto and are subsequently remeasured at their fair value at each balance sheet date.

The method of recognising the resulting gain or loss depends on whether the derivative is

designated as a hedging instrument.

1 ACCOUNTING POLICIES CONTINUED

The right-of-use asset is recognised at an amount equal to the total of the lease liability, any

lease payments made at or before the commencement date, any initial direct costs and the

estimated future dismantling, removal, and site restoration costs. The Group has elected to

apply the revaluation model to right-of-use assets relating to the effective freehold land and

buildings class of property, plant, and equipment. All other right-of-use assets are held under

the cost model and subsequently measured at cost less any accumulated depreciation and

impairment losses and adjusted for any remeasurement of the lease liability.

For assets where the Group is the lessor, leases are classified as finance leases if the terms

ofthe lease transfer substantially all the risks and rewards of ownership to the lessee. All other

leases are classified as operating leases. Where the Group is an intermediate lessor of an asset,

the sublease is classified as a finance lease or an operating lease by reference to the right-of-

use asset arising from the head lease rather than the underlying asset.

Income receivable under operating leases is credited to the income statement on a straight-

line basis over the term of the lease.

Where a sublease is classified as a finance lease the right-of-use asset is derecognised and the

Group recognises a finance lease receivable at an amount equal to the net investment in the

lease. The lease payments are discounted at the interest rate implicit in the lease, or where this

cannot be readily determined, the discount rate used for the head lease. Finance income is

recognised over the lease term based on a pattern reflecting a constant periodic rate of

return on the net investment in the lease.

Obligations arising from sale and leaseback arrangements with repurchase options that do

not fall within the scope of IFRS 16 are classified as other lease related borrowings and

accounted for in accordance with IFRS 9 ‘Financial Instruments’.

Inventories

Inventories are stated at the lower of cost and net realisable value and are valued on a ‘first in,

first out’ basis.

Assets held for sale

Assets, typically properties and related fixtures and fittings, are categorised as held for sale

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

present condition and is being actively marketed. In addition, the Group must be committed

to the sale and completion should be expected to occur within one year from the date of

classification. Assets held for sale are valued at the lower of carrying value and fair value less

costs to sell. Once classified as held for sale, intangible assets and property, plant and

equipment are no longer amortised or depreciated.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

122

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

ischanged as required by IBOR reform, for the purpose of determining whether the hedged

future cash flows are expected to occur, the Group deems that the amount accumulated in

the hedging reserve for that hedging relationship is based on the alternative benchmark rate

on which the hedged future cash flows will be based.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria

forhedge accounting, any cumulative gain or loss existing in equity at that time remains in

equity and is recognised when the forecast transaction is ultimately recognised in the income

statement. When a forecast transaction is no longer expected to occur, the cumulative gain or

loss that was reported in equity is immediately transferred to the income statement.

Amounts that have been recognised in other comprehensive income in respect of cash flow

hedges are reclassified from equity to profit or loss as a reclassification adjustment in the same

period or periods during which the hedged forecast cash flow affects profit or loss.

Contingent consideration

Contingent consideration is initially recognised at fair value at the date of disposal and

subsequently remeasured at its fair value at each balance sheet date and upon settlement.

Finance lease receivables

Finance lease receivables are recognised at an amount equal to the net investment in the

lease and subsequently measured at amortised cost less provision for impairment.

Trade receivables and other receivables

Trade receivables and other receivables are recognised initially at fair value and subsequently

measured at amortised cost less provision for impairment.

The Group applies the expected credit loss model to calculate any loss allowance for finance

lease receivables, trade receivables and other receivables. For finance lease receivables,

trade receivables and other receivables that result from transactions that are within the scope

of IFRS 15 ‘Revenue from Contracts with Customers’ or from transactions that are within the

scope of IFRS 16 ‘Leases’ the loss allowance is measured as the lifetime expected credit loss.

For any other trade or other receivables, the loss allowance is measured as the 12-month

expected credit loss unless the credit risk has increased significantly since initial recognition,

inwhich case the lifetime expected credit losses is used. Details of the methodologies used to

calculate the expected credit loss for the different groupings of finance lease receivables,

trade receivables and other receivables are given in note 25.

1 ACCOUNTING POLICIES CONTINUED

The effective portion of changes in the fair value of derivatives that are designated and

qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss

relating to the ineffective portion is recognised immediately in the income statement.

Gains or losses arising from changes in the fair value of derivatives which are not designated

as part of a hedging relationship are presented in the income statement in the period in which

they arise.

At the inception of a hedging transaction, the Group documents the economic relationship

between hedging instruments and hedged items, as well as its risk management objectives and

strategy for undertaking the hedging transaction. The Group also documents its assessment,

both at hedge inception and on an ongoing basis, of whether the derivatives that are used in

hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

For the purpose of evaluating whether there is an economic relationship between the hedged

item and the hedging instrument, the Group assumes that the benchmark interest rate is not

altered as a result of interest rate benchmark reform. For a cash flow hedge of a forecast

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

rate benchmark reform. In determining whether a previously designated forecast transaction

in a discontinued cash flow hedge is still expected to occur, the Group assumes that the

interest rate benchmark cash flows designated as a hedge will not be altered as a result of

interest rate benchmark reform.

The Group ceases to apply these specific policies for assessing the economic relationship

between the hedged item and the hedging instrument and undertaking its highly probable

assessment of the forecast cash flows when the uncertainty arising from interest rate

benchmark reform regarding the timing and the amount of the interest rate benchmark-

based cash flows is no longer present, or when the hedging relationship is discontinued.

When the basis for determining the contractual cash flows of the hedged item or hedging

instrument changes as a result of IBOR reform and therefore there is no longer uncertainty

arising about the cash flows of the hedged item or the hedging instrument, the Group amends

the formal designation of that hedging relationship to reflect the changes required by IBOR

reform. For this purpose, the hedge designation is amended only to designate an alternative

benchmark rate as the hedged risk, to update the description of the hedged item or to

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

123

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Trade payables and other payables

Trade payables and other payables are recognised initially at fair value and subsequently

measured at amortised cost using the effective interest method.

Employee benefits

Pension costs for the Group’s defined benefit pension plan are determined by the Projected

Unit Credit Method, with actuarial calculations being carried out at each period end date.

Costs are recognised in the income statement within operating expenses and net finance

costs/income. The current service cost, past service cost and gains or losses arising from

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

from plan assets are included within finance costs.

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

comprehensive income. The return on plan assets, excluding amounts included in the net interest

on the net defined benefit asset/liability, is also recognised in other comprehensive income.

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

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. The Trust Deed

provides the Group with an unconditional right to refund of surplus assets assuming the full

settlement of the defined benefit obligation in the event of a plan wind up, or otherwise

augment the benefits due to members, of the plan. Based on these rights, any net surplus is

recognised in full.

Should contributions payable under a minimum funding requirement not be available as a

refund or reduction in future contributions after they are paid into the plan, a liability would be

recognised to this extent when the obligation arose.

Pension costs for the Group’s defined contribution pension plans are charged to the income

statement in the period in which they arise.

Post-retirement medical benefits are accounted for in an identical way to the Group’s defined

benefit pension plan.

1 ACCOUNTING POLICIES CONTINUED

The carrying amount of finance lease receivables, trade receivables and other receivables is

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

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

expectation of recovery depend on the type of debtor/customer and include a debt being

over four months old, the failure of the debtor to engage in a repayment plan and the failure

to recover any amounts through enforcement activity. Subsequent recoveries of amounts

previously written off are credited against other operating charges in the income statement.

Other cash deposits

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.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits on call with banks. Any bank

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.

Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings

are subsequently stated at amortised cost; any difference between the proceeds (net of

transaction costs) and the redemption value is recognised in the income statement over the

period of the borrowings using the effective interest method.

If the basis for determining the contractual cash flows of borrowings measured at amortised

cost changes as a result of interest rate benchmark reform, then the effective interest rate of

the borrowings is updated to reflect the change that is required by the reform. A change in the

basis for determining the contractual cash flows is required by interest rate benchmark reform

when the change is necessary as a direct consequence of the reform and the new basis for

determining the contractual cash flows is economically equivalent to the previous basis.

Preference shares are classified as liabilities. The dividends on these preference shares are

recognised in the income statement as finance costs.

Borrowing costs are recognised as an expense in the period in which they are incurred, except

for interest costs incurred on the financing of major projects, which are capitalised until the

time that the projects are available for use.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

124

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Non-vesting conditions are considered when determining the fair value of the Group’s

share-based payments, and all cancellations of share-based payments, whether by the

Group or by employees, are accounted for in an identical manner with any costs

unrecognised at the date of cancellation being immediately accelerated.

Own shares

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

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

and the original cost being taken to equity. No income or expense is recognised in the

performance statements on own share transactions.

Dividends

Dividends proposed by the Board but unpaid at the period end are recognised in the financial

statements when they have been approved by the shareholders. Interim dividends are

recognised when paid.

Transactions and balance sheet items in a foreign currency

Transactions in a foreign currency are translated to sterling using the exchange rate at the date

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

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

value gain or loss. Gains or losses on disposal of non-monetary assets are recognised in the

income statement.

Government grants

Government grants are recognised when there is reasonable assurance the grants will be

received, and the conditions of the grant will be complied with. Income from government

grants is included within other operating income.

1 ACCOUNTING POLICIES CONTINUED

Key management personnel

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

management personnel are the Directors of the Group and as such the Directors are related

parties of the Group.

Current and deferred tax

The current tax charge is calculated on the basis of the tax laws enacted or substantively

enacted at the balance sheet date and is measured at the amount expected to be paid to,

or recovered from, the tax authorities.

Deferred tax is provided in full, using the liability method, on all differences that have

originated but not reversed by the balance sheet date, and which give rise to an obligation to

pay more or less tax in the future. Differences are defined as the differences between the

carrying value of assets and liabilities and their tax base.

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.

Deferred tax is calculated using tax rates that are expected to apply when the related

deferred tax asset is realised, or the deferred tax liability is settled.

Provisions

Provisions are recognised in the balance sheet when the Group has a present legal or

constructive obligation as a result of a past event and it is probable that an outflow of

economic benefits will be required to settle the obligation.

These provisions are measured at the present value of the expenditure expected to be

required to settle the obligation using a pre-tax rate that reflects current market assessments

ofthe time value of money and the risks specific to the obligation for which the estimates of

future cash flows have not been adjusted.

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

125

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

3 REVENUE AND OPERATING EXPENSES

Revenue

2022

£m

2021

£m

Outlet sales 757.2 376.3

Wholesale sales 31.6 20.4

Revenue from contracts with customers 788.8 396.7

Rental income 10.8 5.0

Total revenue from continuing operations 799.6 401.7

Operating expenses

2022

£m

2021

£m

Change in stocks of finished goods 0.9 (2.1)

Own work capitalised (0.8) (0.8)

Other operating income (9.6) (58.2)

Raw materials and consumables 205.9 105.6

Depreciation of property, plant, and equipment 39.8 38.9

Amortisation of intangible assets 4.4 3.8

Employee costs 214.0 183.9

Impairment (reversal) of freehold and leasehold properties (21.9) 83.5

Other operating charges 224.8 137.6

Operating expenses for continuing operations 657.5 492.2

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 the

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.

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

126

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

4 NON-UNDERLYING

ITEMS

2022

£m

2021

£m

Non-underlying

operating items

Reorganisation and restructuring costs – 1.0

Impairment (reversal) of freehold and leasehold properties (21.6) 83.9

Past service cost in respect of Guaranteed Minimum Pension equalisation – 0.5

Impact of COVID-19 – 10.8

VAT claims (5.1) –

(26.7) 96.2

Non-underlying

non-operating items

Net interest on net defined benefit asset/liability – 0.6

Interest on VAT claims (0.5) –

COVID-19 financing costs – 1.4

Interest rate swap movements (109.2) (8.4)

Contingent consideration fair value movement 0.7 (20.0)

(109.0) (26.4)

Total non-underlying

items for continuing operations (135.7) 69.8

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.

3 REVENUE AND OPERATING EXPENSES CONTINUED

The amounts included in the line items above which have been classified as non-underlying

are as follows:

2022

£m

2021

£m

Raw materials and consumables – 0.1

Employee costs – 1.7

Impairment (reversal) of freehold and leasehold properties (21.9) 83.5

Other operating (income)/charges (4.8) 10.9

(26.7) 96.2

Fees payable to the Company’s Auditor were as follows:

KPMG LLP fees:

2022

£m

2021

£m

Fees payable to the Company’s Auditor for the audit of the Company’s

annual accounts 0.3 0.2

Fees payable to the Company’s Auditor for other services to the Group:

The audit of the Company’s subsidiaries 0.3 0.2

Audit related assurance services 0.1 0.1

0.7 0.5

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

127

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

COVID-19 financing costs

As a result of the COVID-19 outbreak and the consequential impact on its trading ability, the

Group obtained certain waivers from its lenders, primarily in respect of covenants. The costs

related to this were classified as a non-underlying

item in the prior period.

Interest rate swap movements

The Group’s interest rate swaps are revalued to fair value at each balance sheet date.

Forinterest rate swaps which were designated as part of a hedging relationship a gain of

£23.9million (2021: £5.9 million) has been recognised in the hedging reserve in respect of the

effective portion of the fair value movement and £6.2 million (2021: £7.2 million) has been

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

been recognised within the income statement. The cash paid of £1.5 million (2021: £1.6 million)

has been recognised within underlying finance costs to ensure that underlying finance costs

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

recognised within non-underlying

items. In addition, £10.8 million (2021: £12.5 million) of the

balance remaining in the hedging reserve in respect of discontinued cash flow hedges has

been reclassified to the income statement within non-underlying

items.

For interest rate swaps which were not designated as part of a hedging relationship the

fairvalue movement has been recognised within the income statement. The cash paid of

£8.6million (2021: £11.6 million) has been recognised within underlying finance costs to ensure

that underlying finance costs reflect the resulting fixed rate paid on the associated debt. The

remainder of the fair value movement, a gain of £119.8 million (2021: £24.0 million), equal to the

change in the carrying value of the interest rate swaps in the period has been recognised

within non-underlying

items.

The Group terminated one of its interest rate swaps in the prior period resulting in a loss of

£2.3million which was recognised within non-underlying

items.

Contingent consideration fair value movement

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

value at 2 October 2021 and the date of settlement during the current period. The movement

in fair value has been recognised within non-underlying

items.

Impact of taxation

The current tax charge relating to the above non-underlying

items amounts to £1.4 million

(2021: £nil). The deferred tax charge relating to the above non-underlying

items amounts to

£24.6 million (2021: credit of £7.9 million). In addition, there is a non-underlying

deferred tax

credit of £nil (2021: £19.8 million) in relation to the change in corporation tax rate.

1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary

on page 167.

4 NON-UNDERLYING

ITEMS CONTINUED

The revaluation and impairment adjustments in respect of the above were recognised in the

revaluation reserve or income statement as appropriate. The amount recognised in the

income statement comprises:

2022

£m

2021

£m

Impairment of property, plant and equipment (note 11) 48.2 104.0

Reversal of past impairment of property, plant, and equipment (note 11) (69.8) (22.3)

Impairment of assets held for sale (note 19) 0.3 1.8

Reversal of impairment of assets held for sale (note 19) (0.6) –

Valuation fees 0.3 0.4

(21.6) 83.9

Past service cost in respect of Guaranteed Minimum Pension equalisation

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 in the prior period.

Impact of COVID-19

In order to mitigate the spread of COVID-19 the UK government implemented various operating

restrictions in the hospitality industry, such as pub closures, reduced opening times and social

distancing measures. These had a significant impact on the Group’s business and its customers.

Certain associated costs/charges, which primarily comprised bad debt and lease related

provisions, contract penalties and stock write-offs, were classified as a non-underlying

item in the

prior period. Details of government grants received in respect of COVID-19 are provided in note 3.

VAT claims

The Group has submitted claims to HM Revenue & Customs (HMRC) in respect of the VAT

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

amounts receivable, including interest, in the current period.

Net interest on net defined benefit asset/liability

The net interest on the net defined benefit asset/liability in respect of the Group’s defined

benefitpension plan was a charge of £0.2 million (2021: £0.6 million) (note 15). In the prior

periodthis charge was recognised within non-underlying

items. In the current period, the Group

determined that this charge no longer met the criteria to be recognised within non-underlying

items and the current period charge has been presented within underlying

items.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

128

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

6 FINANCE COSTS AND INCOME

2022

£m

2021

£m

Finance costs

Bank borrowings 12.5 11.0

Securitised debt 35.0 37.4

Lease liabilities 18.9 17.7

Other lease related borrowings 21.3 21.1

Other interest payable and similar charges 4.2 6.2

91.9 93.4

Non-underlying

finance costs

Net interest on net defined benefit asset/liability – 0.6

COVID-19 financing costs – 1.4

– 2.0

Total finance costs 91.9 95.4

Finance income

Finance lease and other interest receivable (0.9) (0.9)

(0.9) (0.9)

Non-underlying

finance income

Interest on VAT claims (0.5) –

(0.5) –

Total finance income (1.4) (0.9)

Interest rate swap movements

Hedge ineffectiveness on cash flow hedges (net of cash paid) (0.2) 0.8

Change in carrying value of interest rate swaps (119.8) (24.0)

Transfer of hedging reserve balance in respect of discontinued hedges 10.8 12.5

Loss on termination of interest rate swaps – 2.3

(109.2) (8.4)

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

5 EMPLOYEES

Employee costs

2022

£m

2021

£m

Wages and salaries 191.7 166.5

Social security costs 15.5 13.4

Pension costs 6.3 6.6

Share-based payments 0.5 1.2

Termination costs – 1.2

Employee costs 214.0 188.9

Employee costs for discontinued operations – (5.0)

Employee costs for continuing operations 214.0 183.9

A non-underlying

charge of £1.7 million was included in employee costs for continuing

operations in the prior period.

Average monthly number of employees

2022

Number

2021

Number

Bar staff 10,783 9,578

Management, administration and production 1,370 1,511

Key management personnel compensation

2022

£m

2021

£m

Short-term employee benefits 1.5 1.6

Termination benefits – 0.1

Share-based payments 0.3 0.4

1.8 2.1

Key management personnel have been defined as the Board of Marston’s PLC, including the

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

presented in the Annual Report on Remuneration on pages 87 to 94.

1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary

on page 167.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

129

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

tax of 19% (2021: 19%). The differences are explained below:

Tax reconciliation

2022

£m

2021

£m

Profit/(loss) before tax from continuing operations 163.4 (171.1)

Profit/(loss) before tax multiplied by the corporation tax rate of 19% (2021: 19%) 31.0 (32.5)

Effect of:

Adjustments in respect of prior periods (0.1) (0.5)

Change in deferred tax asset not recognised (8.5) 9.0

Net deferred tax credit in respect of land and buildings (1.8) (2.6)

Costs not deductible for tax purposes – 0.8

Share of (income)/loss of associate (0.6) 2.8

Other amounts on which tax relief is available (2.4) –

Difference between deferred and current tax rates 8.6 –

Impact of change in tax rate – (19.8)

Taxation charge/(credit) for continuing operations 26.2 (42.8)

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

2021. This will increase the Group’s future current tax charge accordingly. The deferred tax

assets and liabilities at 1 October 2022 have been calculated at 25% (2021: 25%).

7 TAXATION

Income statement

2022

£m

2021

£m

Current tax

Current period 0.2 –

Adjustments in respect of prior periods (0.3) (0.5)

Charge in respect of tax on non-underlying

items 1.4 –

1.3 (0.5)

Deferred tax

Current period 0.1 (14.6)

Adjustments in respect of prior periods 0.2 –

Charge/(credit) in respect of tax on non-underlying

items 24.6 (7.9)

Non-underlying

credit in relation to the change in tax rate – (19.8)

24.9 (42.3)

Taxation charge/(credit) for continuing operations reported in the income

statement 26.2 (42.8)

Statement of comprehensive income

2022

£m

2021

£m

Remeasurement of retirement benefits 5.8 2.5

Impairment and revaluation of properties 14.7 9.8

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

130

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Disposal of discontinued operations

2021

£m

Consideration received in cash (net of disposal costs) 228.1

Shares in Carlsberg Marston’s Limited (formerly Carlsberg Marston’s Brewing Company

Limited) 285.1

Balance owed by Marston’s Beer Company Limited at completion 55.5

Contingent consideration 8.9

Total consideration 577.6

Goodwill 29.7

Other intangible assets 62.1

Property, plant and equipment 157.6

Trade loans 8.0

Inventories 28.5

Trade and other receivables 56.8

Cash and cash equivalents 0.1

Borrowings (21.1)

Trade and other payables (20.8)

Deferred tax liabilities (13.8)

Net assets disposed of 287.1

Gain on disposal of discontinued operations 290.5

2021

£m

Consideration received in cash (net of disposal costs) 228.1

Cash and cash equivalents disposed of (0.1)

Net cash inflow on disposal 228.0

The final balance of contingent consideration due of £28.2 million was received during the

currentperiod.

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

131

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

2022

2021

Basic weighted average number of shares 633.1 632.8

Dilutive potential ordinary shares 9.4 –

Diluted weighted average number of shares 642.5 632.8

In the prior period in accordance with IAS 33 ‘Earnings per Share’ the potential ordinary shares

were not dilutive as their inclusion would reduce the loss per share for continuing operations.

10 GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill of £201.7 million was fully impaired in prior accounting periods and has a net book

amount of £nil as at 1 October 2022 and 2 October 2021.

Other intangible assets

Computer

software

£m

Cost

At 3 October 2021 48.4

Additions 3.5

Net transfers to assets held for sale and disposals (1.8)

At 1 October 2022 50.1

Amortisation

At 3 October 2021 12.3

Charge for the period 4.4

Net transfers to assets held for sale and disposals (1.7)

At 1 October 2022 15.0

Net book amount at 2 October 2021 36.1

Net book amount at 1 October 2022 35.1

9 EARNINGS PER ORDINARY SHARE

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,

excluding treasury shares and those held on trust for employee share schemes (note 29).

For diluted earnings/(loss) per share, the weighted average number of ordinary shares in issue

is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share

options granted to employees where the exercise price is less than the weighted average

market price of the Company’s shares during the period.

Underlying

earnings/(loss) per share figures are presented to exclude the effect of non-

underlying

items. The Directors consider that the supplementary figures are a useful indicator

of performance.

2022 2021

Earnings

£m

Per share

amount

Earnings

£m

Per share

amount

Basic earnings/(loss) per share

Total 137.2 21.7 162.8 25.7

Continuing 137.2 21.7 (128.3) (20.3)

Discontinued – – 291.1 46.0

Diluted earnings/(loss) per share

Total 137.2 21.4 162.8 25.7

Continuing 137.2 21.4 (128.3) (20.3)

Discontinued – – 291.1 46.0

Underlying

earnings/(loss) per share figures

Basic underlying

earnings/(loss) per share

Total 27.5 4.3 (84.5) (13.4)

Continuing 27.5 4.3 (86.2) (13.6)

Discontinued – – 1.7 0.3

Diluted underlying

earnings/(loss) per share

Total 27.5 4.3 (84.5) (13.4)

Continuing 27.5 4.3 (86.2) (13.6)

Discontinued – – 1.7 0.3

1 Alternative performance measures (APMs) are defined and reconciled to a statutory equivalent in the Glossary

on page 167.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

132

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

11 PROPERTY, PLANT AND EQUIPMENT

Effective

freehold

land and

buildings

£m

Leasehold

land and

buildings

£m

Fixtures,

fittings,

tools and

equipment

£m

Total

£m

Cost or valuation

At 3 October 2021 1,530.0 482.9 271.2 2,284.1

Additions 34.1 12.8 32.7 79.6

Disposals (5.0) (12.6) (18.9) (36.5)

Transfers between asset classes 49.0 (49.0) – –

Net transfers to assets held for sale (0.8) – (0.1) (0.9)

Revaluation 75.1 – – 75.1

At 1 October 2022 1,682.4 434.1 284.9 2,401.4

Depreciation

At 3 October 2021 0.1 157.2 142.6 299.9

Charge for the period – 14.3 25.5 39.8

Disposals (0.1) (12.6) (18.6) (31.3)

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.

10 GOODWILL AND OTHER INTANGIBLE ASSETS CONTINUED

Computer

software

£m

Cost

At 4 October 2020 41.6

Additions 7.5

Net transfers to assets held for sale and disposals (0.7)

At 2 October 2021 48.4

Amortisation

At 4 October 2020 9.1

Charge for the period 3.8

Net transfers to assets held for sale and disposals (0.6)

At 2 October 2021 12.3

Net book amount at 3 October 2020 32.5

Net book amount at 2 October 2021 36.1

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

133

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

amount would be £1,183.7 million (2021: £1,102.3 million).

Cost at 1 October 2022 includes £8.5 million (2021: £3.1 million) of assets in the course of

construction.

Interest costs of £0.2 million (2021: £nil) were capitalised in the period in respect of the

financing of major projects. The capitalisation rate used was 6%.

The net profit on disposal of property, plant and equipment, intangible assets and properties

classified as held for sale was £2.7 million (2021: loss of £1.1 million).

Capital expenditure authorised and committed at the period end but not provided for in the

financial statements was £4.2 million (2021: £2.7 million).

The net book amount of effective freehold land and buildings held as part of sale and

leaseback arrangements that do not fall within the scope of IFRS 16 ‘Leases’ was £265.3 million

(2021: £230.3 million).

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:

2022 2021

Effective freehold land and buildings

Leased to

tenants

£m

Used by

the Group

£m

Total

£m

Leased to

tenants

£m

Used by

the Group

£m

Total

£m

Cost or valuation 201.2 1,481.2 1,682.4 248.3 1,281.7 1,530.0

Depreciation – – – (0.1) – (0.1)

Net book amount 201.2 1,481.2 1,682.4 248.2 1,281.7 1,529.9

2022 2021

Leasehold land and buildings

Leased to

tenants

£m

Used by

the Group

£m

Total

£m

Leased to

tenants

£m

Used by

the Group

£m

Total

£m

Cost 23.9 410.2 434.1 25.2 457.7 482.9

Depreciation (8.3) (132.4) (140.7) (6.7) (150.5) (157.2)

Net book amount 15.6 277.8 293.4 18.5 307.2 325.7

The services provided to the tenants are considered to be significant to the arrangement as a

whole such that the properties do not qualify as investment properties under IAS 40

‘Investment Property’.

11 PROPERTY, PLANT AND EQUIPMENT CONTINUED

Effective

freehold

land and

buildings

£m

Leasehold

land and

buildings

£m

Plant and

machinery

£m

Fixtures,

fittings,

tools and

equipment

£m

Total

£m

Cost or valuation

At 4 October 2020

1,625.6 392.0 0.1 278.7 2,296.4

Additions 20.2 96.1 – 12.3 128.6

Disposals (12.7) (5.2) (0.1) (19.5) (37.5)

Net transfers to assets held for sale (2.6) – – (0.3) (2.9)

Revaluation (100.5) – – – (100.5)

At 2 October 2021 1,530.0 482.9 – 271.2 2,284.1

Depreciation

At 4 October 2020

0.1 121.3 0.1 136.6 258.1

Charge for the period 0.1 13.6 – 25.2 38.9

Disposals (0.1) (4.7) (0.1) (19.1) (24.0)

Net transfers to assets held for sale – – – (0.2) (0.2)

Impairment – 27.0 – 0.1 27.1

At 2 October 2021 0.1 157.2 – 142.6 299.9

Net book amount at 3 October 2020 1,625.5 270.7 – 142.1 2,038.3

Net book amount at 2 October 2021 1,529.9 325.7 – 128.6 1,984.2

The net book amount of land and buildings is split as follows:

2022

£m

2021

£m

Freehold land and buildings 1,507.7 1,395.2

Leasehold land and buildings with a term greater than 100 years at

acquisition/commencement 174.7 134.7

Leasehold land and buildings with a term less than 100 years at acquisition/

commencement 293.4 325.7

1,975.8 1,855.6

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

134

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

measurements of effective freehold land and buildings have been categorised:

2022

Recurring fair value measurements

Level 1

£m

Level 2

£m

Level 3

£m

Total

£m

Effective freehold land and buildings – – 1,682.4 1,682.4

2021

Recurring fair value measurements

Level 1

£m

Level 2

£m

Level 3

£m

Total

£m

Effective freehold land and buildings – – 1,529.9 1,529.9

There are two inputs to the fair value measurement of the public house assets, being the fair

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

unobservable Level 3 input for the fair maintainable trade is a significant input to the valuation

and as such Level 3 was the most appropriate categorisation for these fair value

measurements. There were no transfers between categories during the period.

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

thefair value by £178.3 million. A reasonably possible increase of 4.0% in the fair maintainable

trade would increase the fair value by £71.3 million and a reasonably possible decrease of

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

movements in the average fair maintainable trade.

The Group’s effective freehold land and buildings are revalued by external independent

qualified valuers on an annual basis using open market values so that the carrying value of

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

a desktop valuation of the remaining two-thirds of the sites, such that all sites are individually

inspected every three years. The last external valuation of the Group’s effective freehold land

and buildings was performed as at 3 July 2022. The Group has an internal team of qualified

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.

11 PROPERTY, PLANT AND EQUIPMENT CONTINUED

Revaluation/impairment

At 3 July 2022 independent chartered surveyors revalued the Group’s effective

freeholdproperties on an open market value basis. During the current and prior period

variousassetswere also reviewed for impairment and/or material changes in value.

Thesevaluation adjustments were recognised in the revaluation reserve or the income

statement as appropriate.

2022

£m

2021

£m

Income statement:

Impairment (48.2) (104.0)

Reversal of past impairment 69.8 22.3

21.6 (81.7)

Revaluation reserve:

Unrealised revaluation surplus 105.8 59.1

Reversal of past revaluation surplus (34.3) (105.0)

71.5 (45.9)

Net increase/(decrease) in shareholders’ equity/property, plant and

equipment 93.1 (127.6)

Fair value of effective freehold land and buildings

IFRS 13 ‘Fair Value Measurement’ requires fair value measurements to be recognised using

afair value hierarchy that reflects the significance of the inputs used in the measurements,

according to the following levels:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the

asset or liability, either directly or indirectly.

Level 3 – inputs for the asset or liability that are not based on observable market data.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

135

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

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

at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 239.3 264.2

Current assets 299.5 312.5

Current liabilities (360.4) (340.1)

Non-current liabilities (35.8) (45.8)

Net assets 142.6 190.8

Group’s share of net assets (40%) 57.0 76.3

Goodwill 203.9 201.7

Elimination of unrealised profit on upstream sales (0.6) (0.6)

Carrying amount of interest in associate 260.3 277.4

2022

£m

2021

£m

Revenue 836.9 628.6

Profit/(loss) from continuing operations 8.2 (34.8)

Other comprehensive expense (2.0) –

Total comprehensive income/(expense) 6.2 (34.8)

Group’s share of profit/(loss) from continuing operations (40%) 3.3 (13.9)

Elimination of unrealised profit on upstream sales – (0.6)

Income/(loss) from associates recognised in the income statement 3.3 (14.5)

Group’s share of other comprehensive expense (40%) (0.8) –

Group’s share of total comprehensive income/(expense) 2.5 (14.5)

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

136

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

14 DEFERRED TAX

Deferred tax is calculated on temporary differences between tax bases of assets and liabilities

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:

Net deferred tax liability/(asset)

2022

£m

2021

£m

At beginning of the period (47.6) (16.7)

Charged/(credited) to the income statement:

Continuing operations 24.9 (42.3)

Discontinued operations – (0.7)

Charged/(credited) to equity:

Impairment and revaluation of properties 14.7 9.8

Hedging reserve 10.2 (1.7)

Retirement benefits 5.8 2.5

Classified as held for sale and disposals – 1.5

At end of the period 8.0 (47.6)

Recognised in the balance sheet

2022

£m

2021

£m

Deferred tax liabilities (after offsetting) 8.0 –

Deferred tax assets (after offsetting) – (47.6)

8.0 (47.6)

The movements in deferred tax assets and liabilities (prior to the offsetting of balances within

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

right of offset and there is an intention to settle the balances net.

12 INTERESTS IN ASSOCIATES CONTINUED

Details of related party transactions with Carlsberg Marston’s Limited (formerly Carlsberg

Marston’s Brewing Company Limited) are as follows:

Transaction amount Balance outstanding

2022

£m

2021

£m

2022

£m

2021

£m

Purchase of goods (171.7) (84.4) (34.3) (42.4)

Rendering of services 1.7 4.3 – 0.5

Settlement of liabilities on behalf of associate 121.8 281.3 (5.9) 78.3

Dividends from associates 19.4 – – –

Receipt of cash on behalf of associate (249.7) (437.7) (0.5) (62.7)

There was a transitional services agreement in place between the Group and Carlsberg

Marston’s Limited (formerly Carlsberg Marston’s Brewing Company Limited) whereby the

transactions for Marston’s Beer Company Limited continued to be processed through the

Group’s systems and bank accounts until 29 January 2022.

All outstanding balances are to be settled in cash within six months and are unsecured.

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

review was undertaken under IAS 36 ‘Impairment of Assets’. The recoverable amount was

estimated on a value in use basis. This was based on forecast cash flows approved by the

boardof Carlsberg Marston’s Limited (formerly Carlsberg Marston’s Brewing Company Limited),

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

the assumptions used would have resulted in an impairment.

13 OTHER NON-CURRENT ASSETS

2022

£m

2021

£m

Finance lease receivables 17.9 15.9

Further detail regarding the impairment of finance lease receivables is provided in note 25.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

137

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

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 – 71.9

Charged/(credited) to the income

statement 3.2 (10.4) – 5.0 (2.2)

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) (88.6)

Charged/(credited) to the income statement 0.9 (20.5) 1.4 (22.6) (40.8)

Charged/(credited) to equity 2.5 – (1.7) – 0.8

Classified as held for sale and disposals – 0.8 – (0.4) 0.4

At 2 October 2021 (3.6) (49.4) (41.3) (33.9) (128.2)

Net deferred tax asset

At 3 October 2020 (16.7)

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 differences

relating to capital losses of £39.1 million (2021: £73.2 million) due to uncertainty over its future

recoverability.

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

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

138

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Changes in life expectancy

An increase in the life expectancy of members will result in benefits being paid out for longer,

leading to an increase in the defined benefit obligation.

The movements in the fair value of plan assets and the present value of the defined benefit

obligation during the period were:

Fair value

of plan assets

Present value of defined

benefit obligation

Net surplus/

(deficit)

2022

£m

2021

£m

2022

£m

2021

£m

2022

£m

2021

£m

At beginning of the period 527.8 531.1 (542.2) (568.3) (14.4) (37.2)

Past service cost – – – (0.5) – (0.5)

Interest income/(expense) 10.4 8.9 (10.6) (9.5) (0.2) (0.6)

Remeasurements:

Return on plan assets

(excluding interest income) (147.3) 3.2 – – (147.3) 3.2

Effect of changes in financial

assumptions – – 181.5 5.1 181.5 5.1

Effect of changes in

demographic assumptions – – 0.7 (0.8) 0.7 (0.8)

Effect of experience

adjustments – – (11.6) 9.9 (11.6) 9.9

Cash flows:

Employer contributions 7.3 7.5 – – 7.3 7.5

Administrative expenses paid

from plan assets (0.9) (1.0) – – (0.9) (1.0)

Benefits paid (22.7) (21.9) 22.7 21.9 – –

At end of the period 374.6 527.8 (359.5) (542.2) 15.1 (14.4)

Pension costs recognised in the income statement

A charge of £nil (2021: £0.5 million) comprising the past service cost is included within

employee costs, a charge of £0.2 million (2021: £0.6 million) comprising the net interest on the

net defined benefit asset/liability is included within finance costs and a charge of £0.9 million

(2021: £1.0 million) comprising the administrative expenses paid from plan assets is included

within finance costs.

15 RETIREMENT BENEFITS

During the period the Group contributed to a funded defined benefit pension plan and a

number of defined contribution pension plans. These plans are considered to be related

parties of the Group.

Defined contribution plans

Pension costs for defined contribution plans are as follows:

2022

£m

2021

£m

Defined contribution plans 6.3 6.1

Defined benefit plan

The Marston’s PLC Pension and Life Assurance Scheme is a final salary pension plan which

provides benefits to members in the form of a guaranteed level of pension payable for life.

Theplan closed to future accrual on 30 September 2014 and the link to future salary increases

was also removed.

The plan operates under the UK regulatory framework and is governed by a board of Trustees

composed of plan participants and representatives of the Group. The Trustees make investment

decisions and set the required contribution rates based on independent actuarial advice.

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

transactions between the respective reporting dates.

The key risks to which the plan exposes the Group are as follows:

Volatility of plan assets

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

reported in the balance sheet as well as movements in the net interest on the net defined

benefit asset/liability reported in the income statement.

Changes in bond yields

Corporate bond yields are used to determine the plan’s defined benefit obligation. Lower

yields will lead to an increased defined benefit obligation. Increases in the defined benefit

obligation will be partly offset by an increase in the value of government and corporate bonds

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

139

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

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/gilt markets.

Allassumptions made within the actuarial valuation of the plan took into consideration market

conditions as at 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 yields.

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 investments

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.

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 at 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

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

140

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

16 DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate swaps

2022

£m

2021

£m

Non-current assets 1.8 –

Current assets 3.3 –

Non-current liabilities (25.5) (170.5)

(20.4) (170.5)

Details of the Group’s interest rate swaps are provided in note 25.

17 INVENTORIES

2022

£m

2021

£m

Raw materials and consumables 3.8 3.2

Finished goods 8.8 9.7

12.6 12.9

18 TRADE AND OTHER RECEIVABLES

2022

£m

2021

£m

Trade receivables 11.2 9.4

Prepayments and accrued income 15.6 8.7

Finance lease receivables 1.8 2.5

Contingent consideration – 28.9

Other receivables 1.5 2.8

30.1 52.3

Further detail regarding the impairment of trade receivables, finance lease receivables and

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

denominated in pounds sterling.

At 1 October 2022 the value of collateral held in the form of cash deposits was £5.6 million

(2021: £5.6 million).

15 RETIREMENT BENEFITS CONTINUED

Plan assets

2022

£m

2021

£m

Equities 45.9 94.2

Bonds/Gilts 92.3 116.7

Cash/Other 62.2 75.3

Buy-in policies (matching annuities) 174.2 241.6

374.6 527.8

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

pooled investments with BlackRock, M&G, Insight and Ruffer which are valued using inputs that

reflect the assumptions that market participants would use in pricing the asset based on market

data from independent sources. The pooled investment vehicles are primarily valued at Level 2 in

the fair value hierarchy, £7.4 million of the pooled investment vehicles are valued at Level 3 in the

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

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

the assumptions market participants would use in pricing the asset, based on the best information

available. The insurance policies are valued at Level 3 in the fair value hierarchy.

The actual return on plan assets was a loss of £136.9 million (2021: a gain of £12.1 million).

Aproportion of the defined benefit obligation has been secured by buy-in policies and as

such this proportion of liabilities is matched by annuities. The Trustees of the plan hold a range

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.

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

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

as at 30 September 2023.

The employer contributions expected to be paid during the financial period ending

30September 2023 amount to £8.0 million.

The weighted average duration of the defined benefit obligation is 12 years (2021: 16 years).

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

141

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

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 that

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:

2022 2021

Due:

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) 67.5

In more than one year but

less than two years 266.8 (1.2) 265.6 47.9 (1.7) 46.2

In more than two years but

less than five years 211.8 (2.7) 209.1 392.7 (3.0) 389.7

In more than five years 1,108.6 (22.7) 1,085.9 1,159.4 (23.5) 1,135.9

1,652.8 (28.1) 1,624.7 1,669.0 (29.7) 1,639.3

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

142

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

The tranches of securitised debt have the following principal terms:

Tranche

2022

£m

2021

£m Interest

Principal repayment

period – by instalments

Expected

average

life

Expected

maturity

date

A2 157.3 183.9 Fixed/floating 2022 to 2027 5 years 2027

A3 200.0 200.0 Fixed/floating 2027 to 2032 10 years 2032

A4 130.9 141.7 Floating 2022 to 2031 9 years 2031

B 155.0 155.0 Fixed/floating 2032 to 2035 13 years 2035

643.2 680.6

The interest payable on each tranche is as follows:

Tranche Before step up After step up Step up date

A2 5.1576% SONIA + 0.1193% + 1.32% July 2019

A3 5.1774% SONIA + 0.1193% + 1.45% April 2027

A4 3-month LIBOR + 0.65% SONIA + 0.1193% + 1.625% October 2012

B 5.6410% SONIA + 0.1193% + 2.55% July 2019

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.

All floating rate notes are economically hedged in full by the Group using interest rate swaps

whereby all interest payments are swapped to fixed interest payable.

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.

Inaddition, Marston’s Issuer PLC held cash of £0.1 million (2021: £0.1 million).

22 TRADE AND OTHER PAYABLES

2022

£m

2021

£m

Trade payables 95.5 109.0

Other taxes and social security 25.1 32.3

Accruals and deferred income 71.3 65.3

Other payables 12.5 14.1

204.4 220.7

The Group has deferred VAT payments of £nil (2021: £15.9 million) under the UK government’s

scheme for the deferral of VAT payments due to COVID-19.

20 BORROWINGS CONTINUED

Fair value of borrowings

The carrying amount and the fair value of the Group’s borrowings are as follows:

Carrying amount Fair value

2022

£m

2021

£m

2022

£m

2021

£m

Bank borrowings 215.0 190.0 215.0 190.0

Securitised debt 643.2 680.6 556.7 614.7

Lease liabilities 377.8 371.6 377.8 371.6

Other lease related borrowings 361.7 361.7 361.7 361.7

Other borrowings 55.0 65.0 55.0 65.0

Preference shares 0.1 0.1 0.1 0.1

1,652.8 1,669.0 1,566.3 1,603.1

The fair value of the Group’s securitised debt is based on quoted market prices and is within

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’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.

21 SECURITISED DEBT

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

2007, a further £330.0 million of secured loan notes (tranches A4 and AB1) were issued in

connection with the securitisation of an additional 437 of the Group’s pubs, also held in

Marston’s Pubs Limited. The loan notes are secured over the properties and their future income

streams and were issued by Marston’s Issuer PLC, a special purpose entity. On 15 January 2014

all of the AB1 notes were repurchased by the Group at par and immediately cancelled.

The carrying value of the securitised pubs at 1 October 2022 was £1,166.7 million

(2021:£1,112.3million).

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

and disposal of securitised properties and restrictions on the ability to move cash to other

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

143

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

25 FINANCIAL INSTRUMENTS

Financial instruments by category

At 1 October 2022

Assets at

fair value

through

profit or

loss

£m

Assets at

amortised

cost

£m

Total

£m

Assets as per the balance sheet

Derivative financial instruments 5.1 – 5.1

Finance lease receivables (before provision) – 23.5 23.5

Trade receivables (before provision) – 11.9 11.9

Other receivables (before provision) – 2.8 2.8

Other cash deposits – 3.0 3.0

Cash and cash equivalents – 27.7 27.7

5.1 68.9 74.0

At 1 October 2022

Derivatives

used for

hedging

£m

Liabilities

at fair

value

through

profit or

loss

£m

Other

financial

liabilities

£m

Total

£m

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

23 PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Property leases

2022

£m

2021

£m

At beginning of the period 11.1 8.8

Released in the period (7.0) (0.2)

Provided in the period 0.9 3.7

Unwinding of discount 0.1 0.1

Utilised in the period (0.8) (1.3)

At end of the period 4.3 11.1

Recognised in the balance sheet

2022

£m

2021

£m

Current liabilities 1.0 1.5

Non-current liabilities 3.3 9.6

4.3 11.1

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.

24 OTHER NON-CURRENT LIABILITIES

2022

£m

2021

£m

Other liabilities 6.5 5.5

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

144

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Fair values of financial instruments

The only financial instruments which the Group holds at fair value are contingent

consideration and derivative financial instruments, which are classified as at fair value through

profit or loss or derivatives used for hedging.

IFRS 13 ‘Fair Value Measurement’ requires fair value measurements to be recognised using

afair value hierarchy that reflects the significance of the inputs used in the measurements,

according to the following levels:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the

asset or liability, either directly or indirectly.

Level 3 – inputs for the asset or liability that are not based on observable market data.

The tables below show the level in the fair value hierarchy into which fair value measurements

have been categorised:

2022

Assets as per the balance sheet

Level 1

£m

Level 2

£m

Level 3

£m

Total

£m

Derivative financial instruments – 5.1 – 5.1

2022

Liabilities as per the balance sheet

Level 1

£m

Level 2

£m

Level 3

£m

Total

£m

Derivative financial instruments – 25.5 – 25.5

2021

Assets as per the balance sheet

Level 1

£m

Level 2

£m

Level 3

£m

Total

£m

Contingent consideration – 28.9 – 28.9

2021

Liabilities as per the balance sheet

Level 1

£m

Level 2

£m

Level 3

£m

Total

£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.

25 FINANCIAL INSTRUMENTS CONTINUED

At 2 October 2021

Assets at

fair value

through

profit or

loss

£m

Assets at

amortised

cost

£m

Total

£m

Assets as per the balance sheet

Contingent consideration 28.9 – 28.9

Finance lease receivables (before provision) – 22.3 22.3

Trade receivables (before provision) – 10.2 10.2

Other receivables (before provision) – 11.2 11.2

Other cash deposits – 3.2 3.2

Cash and cash equivalents – 32.2 32.2

28.9 79.1 108.0

At 2 October 2021

Derivatives

used for

hedging

£m

Liabilities

at fair

value

through

profit or

loss

£m

Other

financial

liabilities

£m

Total

£m

Liabilities as per the balance sheet

Derivative financial instruments 35.6 134.9 – 170.5

Borrowings – – 1,639.3 1,639.3

Trade payables – – 109.0 109.0

Other payables – – 14.1 14.1

35.6 134.9 1,762.4 1,932.9

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

145

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

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 notional 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 tranches

of its securitised debt. The interest rate swap in respect of the A4 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.

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

146

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

fix the interest rate payable on the Group’s bank borrowings. This interest rate swap fixes interest at

2.2% and commences on 30 April 2025. There are early termination dates of 30October 2022 and

1 November 2027. The final termination date is 30 April 2029. Subsequent to the balance sheet

date, amendments to the terms of this interest rate swap were agreed; the early termination date

of 30 October 2022 was removed, the commencement date was brought forward to 30 October

2022 and the rate at which interest is fixed was increased to 3.5%.

On 27 March 2019 the Group recouponed the interest rate swap that fixes the interest rate

payable on the floating rate elements of its A2, A3 and B securitised notes. As a result, the

hedging relationship between this interest rate swap and the associated debt ceased to meet

the qualifying criteria for hedge accounting. The cumulative hedging loss existing in equity at

27March 2019 remained in equity and is being recognised when the forecast transactions are

ultimately recognised in the income statement. Fair value movements in respect of this interest

rate swap after 27 March 2019 are being recognised within the income statement.

The interest rate risk profile, after taking account of derivative financial instruments, is as follows:

2022 2021

Floating

rate

financial

liabilities

£m

Fixed rate

financial

liabilities

£m

Total

£m

Floating

rate

financial

liabilities

£m

Fixed rate

financial

liabilities

£m

Total

£m

Borrowings 531.7 1,121.1 1,652.8 516.7 1,152.3 1,669.0

The weighted average interest rate of the fixed rate borrowings was 5.2% (2021: 5.2%) and the

weighted average period for which the rate is fixed was 14 years (2021: 15 years).

Interest rate benchmark reform

A fundamental reform of major interest rate benchmarks has been undertaken globally,

including the replacement of some interbank offered rates (IBORs) with alternative nearly

risk-free rates (referred to as ‘IBOR reform’).

The Group has transitioned its borrowings and interest rate swaps (which were indexed to

LIBOR) to Sterling Overnight Index Average (SONIA) rates with a credit spread. The Group

applies the amendments to IFRS 9 ‘Financial Instruments’ to those financial instruments and

hedging relationships directly affected by IBOR reform. The Group accounted for the change

to SONIA using the practical expedient introduced by the Interest Rate Benchmark Reform

Phase 2 amendments, which allows the Group to change the basis for determining the

contractual cash flows prospectively by revising the effective interest rate.

25 FINANCIAL INSTRUMENTS CONTINUED

The fixed rate of this interest rate swap at 1 October 2022 was 6.0% (2021: 6.0%).

Interest rate swaps designated as part of a hedging relationship

2022

£m

2021

£m

Carrying amount of hedging instruments (included within derivative

financialinstruments) 5.3 35.6

Change in fair value of hedging instruments used as the basis for recognising

hedge ineffectiveness in the period (22.6) (3.5)

Nominal amount of hedging instruments 130.9 141.7

Change in fair value of hedged items used as the basis for recognising

hedgeineffectiveness in the period 23.9 5.9

Hedging reserve balance in respect of continuing hedges (0.3) (22.9)

Hedging reserve balance in respect of discontinued hedges (50.4) (58.5)

Hedging gains recognised in other comprehensive income 23.9 5.9

Hedge ineffectiveness losses recognised in profit or loss (1.3) (2.4)

Amount reclassified from the hedging reserve to profit or loss in respect

ofcontinuing hedges 6.2 7.2

Amount reclassified from the hedging reserve to profit or loss in respect

ofdiscontinued hedges 10.8 12.5

Hedging reserve

2022

£m

2021

£m

At beginning of the period (81.4) (108.7)

Hedging gains recognised in other comprehensive income 23.9 5.9

Amount reclassified from the hedging reserve to profit or loss 17.0 19.7

Deferred tax on hedging reserve movements (10.2) 1.7

At end of the period (50.7) (81.4)

Interest rate swaps not designated as part of a hedging relationship

On 22 March 2012 the Group entered into two forward starting interest rate swaps of

£60.0million each to fix the interest rate payable on the Group’s bank borrowings. The

finaltermination date of one of the swaps is 30 June 2031 with fixed interest at 2.8% until

30November 2020 and 4.0% thereafter. This swap has an early termination date of 30 March

2024. The other swap with fixed interest at 3.9% was terminated on 2 November 2020.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

147

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Finance lease receivables, trade receivables and other receivables have been grouped as set

out below for the purpose of calculating the expected credit losses:

Gross Loss allowance

2022

£m

2021

£m

2022

£m

2021

£m

Finance lease receivables

Net investment in the lease 23.5 22.3 3.8 3.9

23.5 22.3 3.8 3.9

Trade receivables

Amounts due from current pub tenants 2.7 3.5 0.4 0.6

Miscellaneous trade receivables 9.2 6.7 0.3 0.2

11.9 10.2 0.7 0.8

Other receivables

Amounts due from previous pub tenants 1.1 8.4 1.1 8.2

Amounts due from other property tenants 0.7 1.0 0.1 0.1

Miscellaneous other receivables 1.0 1.8 0.1 0.1

2.8 11.2 1.3 8.4

38.2 43.7 5.8 13.1

Expected credit losses have been calculated as follows:

Gross Loss allowance

2022

£m

2021

£m

2022

£m

2021

£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.

25 FINANCIAL INSTRUMENTS CONTINUED

Foreign currency risk

The Group buys and sells goods denominated in non-sterling currencies, principally US dollars,

Canadian dollars and euros. As a result, movements in exchange rates can affect the value of

the Group’s income and expenditure. The Group’s exposure in this area is not considered to

besignificant.

Counterparty risk

The Group’s counterparty risk in respect of its cash and cash equivalents and other cash

deposits is mitigated by the use of various banking institutions for its deposits.

There is no significant concentration of counterparty risk in respect of the Group’s pension

assets, as these are held with a range of institutions.

Credit risk

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

rated, these ratings are used. Otherwise, if there is no independent rating, an assessment is

made of the credit quality of the customer, taking into account its financial position, past

experience and other factors. Individual credit limits are set based on internal or external ratings

in accordance with limits set by the Board. The utilisation of and adherence to credit limits is

regularly monitored.

The financial assets of the Group which are subject to the expected credit loss model under

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

impairment requirements of IFRS 9 however the impairment loss is immaterial.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

148

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

The movements in the loss allowances for finance lease receivables, trade receivables and

other receivables are as follows:

Finance lease receivables

2022

£m

2021

£m

At beginning of the period 3.9 2.9

Net increase in loss allowance recognised in profit or loss 0.1 1.0

Amounts written off as uncollectible (0.2) –

At end of the period 3.8 3.9

Trade receivables

2022

£m

2021

£m

At beginning of the period 0.8 0.5

Net (decrease)/increase in loss allowance recognised in profit or loss (0.1) 0.3

At end of the period 0.7 0.8

12-month expected

credit losses

Lifetime expected

creditlosses

Other receivables

2022

£m

2021

£m

2022

£m

2021

£m

At beginning of the period 0.1 0.2 8.3 8.5

Net (decrease)/increase in loss allowance recognised

in profit or loss – (0.1) 0.1 –

Amounts written off as uncollectible – – (7.2) (0.2)

At end of the period 0.1 0.1 1.2 8.3

The Group has no significant concentration of credit risk in respect of its customers.

Themaximum exposure to credit risk at the reporting date is the carrying value of each class

ofreceivable.

Liquidity risk

The Group applies a prudent liquidity risk management policy, which involves maintaining

sufficient cash, ensuring the availability of funding through an adequate amount of

committed credit facilities and having the ability to close out market positions. Due to the

dynamic nature of the underlying business, the Group maintains the availability of committed

credit lines to ensure that it has flexibility in funding.

25 FINANCIAL INSTRUMENTS CONTINUED

Amounts due from pub tenants

Amounts due from current pub tenants result almost entirely from transactions that are within

the scope of IFRS 15 ‘Revenue from Contracts with Customers’ 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 losses. After accounting for collateral held in the

form of cash deposits the remaining balance due is low and as such the expected credit losses

are minimal.

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

losses. The historical loss rate on closed accounts, adjusted to reflect current and forward-

looking information regarding macroeconomic factors affecting customers’ ability to pay,

such as the impact of COVID-19 and the cost-of-living crisis, is used to measure the expected

credit losses on these receivables.

Miscellaneous trade receivables

Miscellaneous trade receivables result almost entirely from transactions that are within the

scope of IFRS 15 and as such the loss allowance is calculated as the lifetime expected credit

losses. Due to the very low credit risk on the majority of these receivables the expected credit

losses are minimal.

Amounts due from other property tenants

Amounts due from other property tenants are almost entirely 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 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, the remaining balance due is low and as such the

expected credit losses are minimal.

Miscellaneous other receivables

Miscellaneous other receivables do not generally result from transactions that are within the

scope of IFRS 15 and do not comprise lease receivables resulting from transactions that are

within the scope of IFRS 16. These receivables are considered to have low credit risk and as

such the loss allowance is calculated as the 12-month expected credit losses. Receivables are

considered to have low credit risk where there is a low risk of default and it is expected that the

debtor will be able to meet its payment obligations in the near future.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

149

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

26 SUBSIDIARY UNDERTAKINGS

Details of the Group’s subsidiary undertakings are provided in note 6 to the Company

financialstatements.

27 SHARE-BASED PAYMENTS

During the period there were three classes of equity-settled employee share incentive

plansoutstanding:

(a) Save As You Earn (SAYE). Under this scheme employees enter into a savings contract for a

period of three to five years and options are granted on commencement of the contract,

exercisable using the amount saved under the contract at the time it terminates. Options

under the scheme are granted at a discount to the average quoted market price of the

Company’s shares at the time of the invitation and are not subject to performance

conditions. Exercise of options is subject to continued employment.

(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

required no later than the tenth anniversary of the date of grant.

onlyvest provided the participant satisfies the minimum shareholding requirement and

performance conditions relating to earnings per share, cash flow, return on capital, profit

before tax and relative total shareholder return are met. LTIP options are exercisable no later

than the tenth anniversary of the date of grant.

In 2010, HM Revenue & Customs (HMRC) approved an Approved Performance Share Plan

(APSP) to enable participants in the LTIP to benefit from UK tax efficiencies. As such, awards

made in 2010 and subsequent years may comprise an HMRC approved option (in respect of

the first £30,000 worth of an award) and an unapproved LTIP award for amounts in excess of

this HMRC limit. A further share award (a linked award) is also provided to enable participants

to fund the exercise of the approved option. This linked award is satisfied by way of shares held

on trust, but these additional shares are not generally delivered to the participant. Under these

rules the LTIP options are still issued at nil cost to the employee.

25 FINANCIAL INSTRUMENTS CONTINUED

Management monitor rolling forecasts of the Group’s liquidity reserve (comprising undrawn

borrowing facilities and cash and cash equivalents) on the basis of expected cash flow. In

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

monitoring balance sheet liquidity ratios against internal and external regulatory requirements.

The Group’s borrowing covenants are subject to regular review.

The tables below analyse the Group’s financial liabilities and non-settled derivative financial

instruments into relevant maturity groupings based on the remaining period at the balance

sheet date to the contractual maturity date. The amounts disclosed in the tables are the

contractual undiscounted cash flows.

At 1 October 2022

Less than

1 year

£m

Between

1 and 2

years

£m

Between

2 and 5

years

£m

Over

5 years

£m

Total

£m

Borrowings 163.6 357.0 420.7 1,917.3 2,858.6

Derivative financial instruments (9.4) (7.7) 2.8 84.4 70.1

Trade payables 95.5 – – – 95.5

Other payables 12.5 – – – 12.5

262.2 349.3 423.5 2,001.7 3,036.7

At 2 October 2021

Less than

1year

£m

Between

1and

2years

£m

Between

2and 5

years

£m

Over

5years

£m

Total

£m

Borrowings 134.7 116.3 572.9 1,956.4 2,780.3

Derivative financial instruments 17.4 15.9 53.4 140.8 227.5

Trade payables 109.0 – – – 109.0

Other payables 14.1 – – – 14.1

275.2 132.2 626.3 2,097.2 3,130.9

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

150

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

using the Black-Scholes option-pricing model. The significant inputs into the model for all

schemes unless otherwise stated were:

2022 2021

Dividend yield % 2.1 to 2.2 –

Expected volatility % 36.1 to 45.6 75.0 to 85.4

Risk-free interest rate % 0.5 to 2.0 0.1 to 0.3

Expected life of rights

SAYE 3 years N/A

Deferred bonus N/A 3 years

LTIP 5 years 5 years

The expected volatility is based on historical volatility over the expected life of the rights.

The fair value of options granted during the current period in relation to the SAYE was 12.2p

(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

granted during the period in relation to the LTIP was 64.5p (2021: 97.0p).

The weighted average share price for options exercised over the period was 67.8p (2021:

88.7p). The total charge for the period relating to employee share-based payment plans was

£0.5 million (2021: £1.2 million), all of which related to equity-settled share-based payment

transactions. After tax, the total charge was £0.5 million (2021: £1.1 million).

28 EQUITY SHARE CAPITAL

2022 2021

Allotted, called up and fully paid

Number

Value

£m

Number

Value

£m

Ordinary shares of 7.375p each:

At beginning and end of the period 660.4 48.7 660.4 48.7

27 SHARE-BASED PAYMENTS CONTINUED

The tables below summarise the outstanding share options:

Number of shares

Weighted average

exercise price

SAYE:

2022

2021

2022

2021

Outstanding at beginning of the period 1.5 3.6 92.4 97.3

Granted 7.6 – 44.0 –

Exercised – (0.1) – 89.2

Expired (1.2) (2.0) 85.3 101.3

Outstanding at end of the period 7.9 1.5 46.7 92.4

Exercisable at end of the period 0.4 0.9 97.2 89.5

Range of exercise prices

44.0p to

110.0p

89.0p to

124.0p

Weighted average remaining contractual life (years) 3.3 0.8

Number of shares

Weighted average

exercise price

Deferred bonus:

2022

2021

2022

2021

Outstanding at beginning of the period 0.4 0.4 – –

Granted – 0.3 – –

Exercised (0.1) (0.3) – –

Outstanding at end of the period 0.3 0.4 – –

Exercisable at end of the period – – – –

Number of shares

Weighted average

exercise price

LTIP:

2022

2021

2022

2021

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 – – – –

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

151

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

30 NET DEBT

Analysis of net debt

2022

£m

2021

£m

Cash and cash equivalents

Cash at bank and in hand 27.7 32.2

27.7 32.2

Financial assets

Other cash deposits 3.0 3.2

3.0 3.2

Debt due within one year

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)

Debt due after one year

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)

Net debt (1,594.0) (1,603.9)

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 21).

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

Value

£m

Number

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

152

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

31 WORKING CAPITAL AND NON-CASH MOVEMENTS

Working capital movement

2022

£m

2021

£m

Decrease in inventories 0.3 2.9

Increase in trade and other receivables (7.4) (12.7)

(Decrease)/increase in trade and other payables (24.7) 3.4

(31.8) (6.4)

Non-cash movements

2022

£m

2021

£m

Movements in respect of property, plant and equipment, assets held for sale

and intangible assets (24.6) 84.6

(Income)/loss from associates (3.3) 14.5

Non-cash movements in respect of leases (3.0) 0.3

Share-based payments 0.5 1.2

(30.4) 100.6

Further details of movements in respect of intangible assets, property, plant and equipment

and assets held for sale are given in notes 10, 11 and 19.

32 ORDINARY DIVIDENDS ON EQUITY SHARES

No dividends were paid during the current or prior period. A final dividend for 2022 has not

been proposed.

30 NET DEBT CONTINUED

Reconciliation of net cash flow to movement in net debt

2022

£m

2021

£m

Decrease in cash and cash equivalents in the period (4.5) (8.5)

(Decrease)/increase in other cash deposits (0.2) 1.2

Disposals – 0.1

Cash outflow from movement in debt 30.9 125.3

Net cash inflow 26.2 118.1

Non-cash movements and deferred issue costs (16.3) (88.9)

Disposals and classified as held for sale – (0.1)

Movement in net debt in the period 9.9 29.1

Net debt at beginning of the period (1,603.9) (1,633.0)

Net debt at end of the period (1,594.0) (1,603.9)

2022

£m

2021

£m

Net debt excluding lease liabilities (1,216.2) (1,232.3)

Lease liabilities (377.8) (371.6)

Net debt (1,594.0) (1,603.9)

Changes in liabilities arising from financing activities are as follows:

2022 2021

Borrowings

£m

Derivative

financial

instruments

£m

Total

financing

liabilities

£m

Borrowings

£m

Derivative

financial

instruments

£m

Total

financing

liabilities

£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)

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

153

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

2022

£m

2021

£m

Interest expense on lease liabilities 18.9 17.7

Expenses relating to short-term leases 0.7 0.6

Expenses relating to leases of low-value assets, excluding short-term leases

oflow-value assets 0.5 0.6

COVID-19 rent concessions recognised in profit or loss – 0.1

Variable lease payments 0.1 –

Income from subleasing right-of-use assets 1.4 0.6

Total cash outflow for leases 24.4 41.4

Additions to right-of-use assets 9.5 93.0

The table below analyses the Group’s lease liabilities into relevant maturity groupings based

on the remaining period at the balance sheet date to the contractual maturity date.

Theamounts disclosed in the table are the contractual undiscounted cash flows.

2022

£m

2021

£m

Less than one year 30.4 25.4

Between one and two years 28.9 26.9

Between two and five years 85.5 83.2

Over five years 576.8 583.1

721.6 718.6

The Group as lessor

The Group leases a proportion of its licensed estate and other unlicensed properties to tenants.

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.

33 LEASES

The Group as lessee

The Group leases a number of its properties. Right-of-use assets in respect of leasehold land and

buildings 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

are classed as effective freehold land and buildings within property, plant and equipment.

Right-of-use assets in respect of any other leasehold land and buildings are classed as leasehold

land and buildings within property, plant and equipment. The Group’s property leases have

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.

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

option to purchase the asset for a nominal amount at the end of the lease.

Depreciation charge for right-of-use assets

2022

£m

2021

£m

Leasehold land and buildings 12.1 11.5

Fixtures, fittings, tools and equipment 0.2 0.2

12.3 11.7

Carrying amount of right-of-use assets

2022

£m

2021

£m

Effective freehold land and buildings 112.5 62.2

Leasehold land and buildings 254.0 287.2

Fixtures, fittings, tools and equipment 0.7 0.9

367.2 350.3

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

154

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

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 H1

2022. The terms of the Group’s bank and private placement borrowings remain unchanged.

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

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

155

COMPANY BALANCE SHEET

As at 1 October 2022

Note

1 October

2022

£m

2 October

2021

£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

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

156

COMPANY STATEMENT OF CHANGES IN EQUITY

For the 52 weeks ended 1 October 2022

Equity

capital

£m

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) 74.3 414.7

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) 0.1

Transfer to profit and loss reserves – – (11.6) (23.7) – – 35.3 –

Total transactions with owners – – (11.6) (23.7) – 0.8 35.8 1.3

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 36.8

Share-based payments – – – – – – 0.5 0.5

Sale of own shares – – – – – 0.2 (0.2) –

Transfer to profit and loss reserves – – (1.1) – – – 1.1 –

Total transactions with owners – – (1.1) – – 0.2 1.4 0.5

At 1 October 2022 48.7 334.0 25.4 – 6.8 (110.9) 375.4 679.4

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

157

NOTES

For the 52 weeks ended 1 October 2022

The Directors continue to adopt the going concern basis of accounting in preparing the

financial statements. Details of the going concern assessment performed by the Group are

provided in note 1 to the Group financial statements.

Turnover

Turnover represents rent receivable, which is recognised over time and in the period to which it

relates.

Current and deferred tax

The tax currently payable is based on taxable profit for the period. Taxable profit differs from

net profit as reported in the accounts because it excludes items of income or expense that are

taxable or deductible in other periods and it further excludes items that are never taxable or

deductible. The Company’s liability for current tax is calculated using tax rates that have been

enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets

are recognised to the extent that it is probable that they will be recovered against the reversal of

deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised

if the timing difference arises from goodwill or from the initial recognition of other assets and

liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and

reducedto the extent that it is no longer probable that sufficient taxable profits will be available

to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that

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

directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets

and liabilities are offset when the Company has a legally enforceable right to offset current tax

assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same

tax authority.

1 ACCOUNTING POLICIES

The Company’s principal accounting policies are set out below:

Company information

Marston’s PLC is a public company limited by shares incorporated in England and Wales and

domiciled in the UK. The registered office is Marston’s House, Brewery Road, Wolverhampton,

WV1 4JT.

Basis of preparation

These financial statements have been prepared in accordance with FRS 102 ‘The Financial

Reporting Standard applicable in the UK and Republic of Ireland’ (FRS 102) and the

requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the

Company. Monetary amounts in these financial statements are rounded to the nearest

£0.1million.

The financial statements have been prepared under the historical cost convention modified to

include the revaluation of effective freehold land and buildings and the holding of certain

financial instruments at fair value.

The Company is a qualifying entity for the purposes of FRS 102, as it prepares publicly available

consolidated financial statements, which are intended to give a true and fair view of the

assets, liabilities, financial position and profit or loss of the Group. The Company has therefore

taken advantage of the exemptions from the following disclosure requirements in FRS 102:

• Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flows and related

notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ – Interest income/expense and net gains/losses for

each category of financial instrument not measured at fair value through profit or loss,

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

158

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Financial instruments

The Company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’

and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the balance sheet when the Company becomes party

to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial

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

simultaneously.

Basic financial assets

Basic financial assets, which comprise amounts owed by Group undertakings, other debtors and

cash and cash equivalents, are initially measured at the transaction price including transaction

costs and are subsequently carried at amortised cost using the effective interest method.

Other financial assets

Derivatives, including interest rate swaps, are not basic financial assets and are accounted for

as set out below.

Financial assets, other than those held at fair value through profit or loss, are assessed for

indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more

events that occurred after the initial recognition of the financial asset, the estimated future

cash flows have been affected. If an asset is impaired, the impairment loss is the difference

between the carrying amount and the present value of the estimated cash flows discounted

at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment

was recognised, the impairment is reversed. The reversal is such that the current carrying amount

does not exceed what the carrying amount would have been, had the impairment not

previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the

asset expire or are settled, or when the Company transfers the financial asset and substantially

all the risks and rewards of ownership to another entity.

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

residual interest in the assets of the Company after deducting all of its liabilities.

1 ACCOUNTING POLICIES CONTINUED

Fixed assets

• Land and buildings which are either freehold or are in substance freehold assets are

classed as effective freehold land and buildings. This includes leasehold land and buildings

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.

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

valuation. Leasehold land and buildings and fixtures, fittings, plant and equipment are

stated at cost.

• Depreciation is charged to the profit and loss account on a straight-line basis to provide for

the cost or valuation of the assets less their residual values over their useful lives.

• Land and buildings are depreciated to their residual values over the lower of the lease term

(where applicable) and 50 years.

• Fixtures, fittings, plant and equipment are depreciated over seven years.

• Interest costs directly attributable to capital projects are capitalised.

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

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 such that all sites are individually

inspected every three years. Substantially all of the Company’s effective freehold land and

buildings have been valued by a third-party in accordance with the Royal Institution of

Chartered Surveyors’ Red Book. These valuations are performed directly by reference to

observable prices in an active market or recent market transactions on arm’s length terms.

Internal valuations are performed on the same basis.

When a valuation is below current carrying value, the asset concerned is reviewed for

impairment. Impairment losses are charged to the revaluation reserve to the extent that a

previous gain has been recorded, and thereafter to the profit and loss account. Surpluses

onrevaluation are recognised in the revaluation reserve, except to the extent they reverse

previously charged impairment losses, in which case the reversal is recorded in the profit and

lossaccount.

Disposals of fixed assets

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

159

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Obligations arising from sale and leaseback arrangements with repurchase options that do

not fall within the scope of Section 20 ‘Leases’ of FRS 102 are classified as other lease related

borrowings and accounted for as secured loans on an amortised cost basis.

Investments in subsidiaries

Interests in subsidiaries are initially measured at cost and subsequently measured at cost less

any accumulated impairment losses. The investments are assessed for impairment at each

reporting date and any impairment losses or reversals of impairment losses are recognised

immediately in profit or loss.

Provisions

Provisions are recognised in the balance sheet when the Company has a present legal

orconstructive obligation as a result of a past event and it is probable that an outflow of

economic benefits will be required to settle the obligation.

The amount recognised as a provision is the best estimate of the consideration required to

settle the present obligation at the balance sheet date, taking into account the risks and

uncertainties surrounding the obligation.

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

market assessments of the time value of money and the risks specific to the obligation for which

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

theperiod it arises.

Dividends

Dividends proposed by the Board but unpaid at the period end are recognised in the financial

statements when they have been approved by the shareholders. Interim dividends are

recognised when paid.

Preference shares

Preference shares are treated as borrowings, and dividends payable on those preference

shares are charged as interest in the profit and loss account.

1 ACCOUNTING POLICIES CONTINUED

Basic financial liabilities

Basic financial liabilities, comprising amounts owed to Group undertakings, other creditors

and borrowings, are initially recognised at the transaction price and subsequently carried at

amortised cost using the effective interest method.

Other financial liabilities

Derivatives, including interest rate swaps, are not basic financial liabilities and are accounted

for as set out below.

Financial liabilities are derecognised when the Company’s contractual obligations expire or

are discharged or cancelled.

Derivatives

The Company uses derivative financial instruments to hedge the Group’s exposure to

fluctuations in interest rates. Derivative financial instruments are initially recognised in the

balance sheet at fair value and are subsequently remeasured to their fair value at each

balance sheet date. The Company has not designated any derivative financial instruments as

hedging instruments and as such any gains or losses on remeasurement are recognised in the

profit and loss account immediately.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative

with a negative fair value is recognised as a financial liability.

Leases

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

leases.

Assets held under finance leases are recognised as assets at the lower of the assets’ fair value

at the date of inception of the lease and the present value of the minimum lease payments.

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

tothe profit and loss account so as to produce a constant periodic rate of interest on the

remaining balance of the liability.

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

160

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Valuation of interest rate swaps

The Company’s interest rate swaps are held at fair value. The Company 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 carrying amount of the interest rate swaps is shown in note 10.

3 AUDITOR’S REMUNERATION

Fees payable to the Company’s Auditor for the audit of the Company’s annual accounts are

disclosed in note 3 to the Group financial statements. Fees paid to the Company’s Auditor for

non-audit services to the Company itself are not required to be disclosed as the Group

financial statements disclose such fees on a consolidated basis.

4 EMPLOYEES

The average monthly number of people employed by the Company during the period was nil

(2021: nil).

1 ACCOUNTING POLICIES CONTINUED

Group undertakings

There is an intra group funding agreement in place between the Company and certain

othermembers of the Group. This agreement stipulates that all balances outstanding on any

intercompany loan account between these companies which exceed £1 are interest bearing

at a prescribed rate.

There is a 12.5% subordinated loan owed to the Company by Marston’s Pubs Limited and

thereare deep discount bonds owed by the Company to Banks’s Brewery Insurance Limited.

Nointerest is payable on any other amounts owed by/to Group companies who are not party to

the intra group funding agreement.

All amounts owed by/to Group undertakings are unsecured and, with the exception of the

subordinated loan and deep discount bonds, repayable on demand.

2 JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’s accounting policies, the Directors are required to make

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

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161

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

The net book amount of land and buildings is split as follows:

2022

£m

2021

£m

Freehold land and buildings 138.6 123.9

Leasehold land and buildings with a term greater than 100 years at

acquisition/commencement 54.1 48.1

Leasehold land and buildings with a term less than 100 years at acquisition/

commencement 11.5 14.2

204.2 186.2

If the effective freehold land and buildings had not been revalued, the historical cost net book

amount would be £159.4 million (2021: £146.6 million).

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).

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

land and buildings held as part of sale and leaseback arrangements that do not fall within the

scope of Section 20 ‘Leases’ of FRS 102 was £92.6 million (2021: £80.7 million). The net book

amount of fixtures, fittings, plant and equipment held under finance leases was £0.7 million

(2021: £0.9 million).

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.

5 TANGIBLE FIXED ASSETS

Effective

freehold

land and

buildings

£m

Leasehold

land and

buildings

£m

Fixtures,

fittings,

plant and

equipment

£m

Total

£m

Cost or valuation

At 3 October 2021 172.0 32.9 1.2 206.1

Additions 7.8 1.5 – 9.3

Transfers to/from Group undertakings (6.3) – – (6.3)

Revaluation 19.6 – – 19.6

Disposals (0.4) (3.2) – (3.6)

At 1 October 2022 192.7 31.2 1.2 225.1

Depreciation

At 3 October 2021 – 18.7 0.3 19.0

Charge for the period – 1.1 0.2 1.3

Impairment – 3.1 – 3.1

Disposals – (3.2) – (3.2)

At 1 October 2022 – 19.7 0.5 20.2

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

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

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162

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

6 FIXED ASSET INVESTMENTS

Subsidiary

undertakings

£m

Cost

At 3 October 2021 263.3

Capital contribution in respect of equity-settled share-based payments 0.5

At 1 October 2022 263.8

Net book amount at 2 October 2021 263.3

Net book amount at 1 October 2022 263.8

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.

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)

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

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163

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

Nature of business Class of share

Proportion of

shares held

directly by

Marston’s PLC

Proportion of

shares held by

the Group

Pitcher and Piano Limited Dormant Ordinary £1 – 100%

Porter Black (2003) Limited Dormant Ordinary £1 – 100%

QP Bars Limited Dormant Ordinary £1 – 100%

Refresh Group Limited * Dormant Ordinary 1p – 100%

Refresh UK Limited * Dormant Ordinary 10p – 100%

Ringwood Brewery Limited * Dormant Ordinary £1 – 100%

S.K. Williams Limited * Dormant Ordinary £1 – 100%

SDA Limited * Dormant Ordinary £1 – 100%

Sherwood Forest Properties Limited Dormant Ordinary £1 – 100%

Sovereign Inns Limited * Dormant Ordinary £1 – 100%

The Gray Ox Limited * Dormant Ordinary £1 – 100%

The Wychwood Brewery Company Limited * Dormant Ordinary £1 – 100%

W&DB (Finance) Limited Dormant Ordinary £1 – 100%

W. & D. Limited * Dormant Ordinary £1 – 100%

Wizard Inns Limited Dormant ‘A’ Ordinary 1p – 100%

Deferred 1p – 100%

Wychwood Holdings Limited * Dormant ‘A’ Ordinary 1p – 100%

* An application to strike off and dissolve these companies was submitted to Companies House prior to the date

of issuance of these financial statements.

The registered office of all of the above subsidiaries is Marston’s House, Brewery Road,

Wolverhampton, WV1 4JT, with the exception of Banks’s Brewery Insurance Limited, Marston’s

Issuer PLC and Marston’s Issuer Parent Limited. The registered office of Banks’s Brewery Insurance

Limited is PO Box 33, Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 4AT. The registered

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.

All subsidiaries have been included in the consolidated financial statements. Although the

Group does not hold any shares in Marston’s Issuer PLC and its parent company, Marston’s

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

Group. Marston’s Issuer PLC was set up with the sole purpose of issuing debt secured on the

assets of Marston’s Pubs Limited. Wilmington Trust SP Services (London) Limited holds the shares

of Marston’s Issuer Parent Limited under a declaration of trust for charitable purposes.

6 FIXED ASSET INVESTMENTS CONTINUED

The Company had the following subsidiary undertakings at 1 October 2022:

Nature of business Class of share

Proportion of

shares held

directly by

Marston’s PLC

Proportion of

shares held by

the Group

Marston’s Estates Limited Property

management Ordinary 25p – 100%

Marston’s Operating Limited Pub retailer Ordinary £1 – 100%

Marston’s Pubs Limited Pub retailer Ordinary £1 – 100%

Marston’s Pubs Parent Limited Holding company Ordinary £1 – 100%

Marston’s Telecoms Limited Telecommunications Ordinary £1 – 100%

Marston’s Trading Limited Pub retailer Ordinary £5 – 100%

Banks’s Brewery Insurance Limited Insurance Ordinary £1 – 100%

Marston’s Acquisitions Limited Acquisition company Ordinary 25p – 100%

Preference £1 – 100%

Marston’s Corporate Holdings Limited Holding company Ordinary £1 100% 100%

Marston’s Issuer PLC Financing company Ordinary £1 – –

Marston’s Issuer Parent Limited Holding company Ordinary £1 – –

Bedford Canning Company Limited * Dormant Ordinary £1 – 100%

Bluu Limited * Dormant Ordinary £1 – 100%

Brasserie Restaurants Limited Dormant Ordinary £1 – 100%

Celtic Inns Holdings Limited Dormant Ordinary 1p – 100%

Celtic Inns Limited Dormant Ordinary £1 – 100%

Eldridge, Pope & Co., Limited Dormant Ordinary 50p – 100%

English Country Inns Limited Dormant Ordinary 50p – 100%

EP Investments 2004 Limited * Dormant Ordinary 1p – 100%

Fairdeed Limited * Dormant ‘A’ Ordinary £1 – 100%

Fayolle Limited Dormant Ordinary £1 – 100%

John Marston’s Taverners Limited Dormant Ordinary £1 – 100%

Lambert Parker & Gaines Limited Dormant Ordinary £1 – 100%

Mansfield Brewery Limited Dormant Ordinary 25p – 100%

Mansfield Brewery Properties Limited * Dormant Ordinary £1 – 100%

Mansfield Brewery Trading Limited Dormant Ordinary £1 – 100%

Marston, Thompson & Evershed Limited Dormant Ordinary 25p – 100%

Marston’s Developments Limited * Dormant Ordinary £1 – 100%

Marston’s Property Developments Limited Dormant Ordinary £1 – 100%

Osprey Inns Limited Dormant Ordinary £1 – 100%

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

164

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

8 CREDITORS

Amounts falling due within one year

2022

£m

2021

£m

Amounts owed to Group undertakings 449.4 673.2

Finance leases 0.9 0.5

Other lease related borrowings (0.1) (0.1)

Corporation tax 15.4 10.0

Accruals and deferred income 9.6 7.3

Other creditors 0.4 0.8

475.6 691.7

Amounts falling due after more than one year

2022

£m

2021

£m

Finance leases 19.5 20.0

Other lease related borrowings 88.5 88.3

Other borrowings 40.0 40.0

Preference shares 0.1 0.1

Derivative financial instruments 1.8 15.4

Accruals and deferred income 9.2 10.2

Other creditors – 0.6

159.1 174.6

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

general meetings of the Company, carrying four votes per share.

Other lease related borrowings represent amounts due under sale and leaseback arrangements

that do not fall within the scope of Section 20 ‘Leases’ of FRS 102. The Company 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 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.

6 FIXED ASSET INVESTMENTS CONTINUED

The Company had the following associates at 1 October 2022:

Nature of

business

Class of

Proportion

of shares

held

directly by

Marston’s

PLC

Proportion

of shares

held by the

Group

Carlsberg Marston’s Limited Brewer Ordinary £1 – 40%

(formerly Carlsberg Marston’s Brewing Company Limited)

The registered office of Carlsberg Marston’s Limited (formerly Carlsberg Marston’s Brewing

Company Limited) is Marston’s House, Brewery Road, Wolverhampton, WV1 4JT.

7 DEBTORS

Amounts falling due within one year

2022

£m

2021

£m

Amounts owed by Group undertakings 252.3 520.5

Prepayments and accrued income 0.1 –

Other debtors 3.3 3.2

255.7 523.7

Amounts falling due after more than one year

2022

£m

2021

£m

12.5% subordinated loan owed by Group undertaking 590.4 521.5

Derivative financial instruments 1.8 15.4

592.2 536.9

The gross contractual amount outstanding in respect of the subordinated loan was £1,490.4

million (2021: £1,316.6 million) and the impact of discounting the expected cash flows at 12.5%

was £900.0 million (2021: £795.1 million).

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

165

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

10 FINANCIAL INSTRUMENTS

Carrying amount of financial assets

2022

£m

2021

£m

Measured at fair value through profit or loss 1.8 15.4

Carrying amount of financial liabilities

2022

£m

2021

£m

Measured at fair value through profit or loss 1.8 15.4

The only financial instruments that the Company holds at fair value are interest rate swaps.

Thefair values of the Company’s interest rate swaps are obtained using a market approach and

reflect the estimated amount the Company would expect to pay or receive on termination of

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

each balance sheet date.

11 OPERATING LEASE COMMITMENTS

At 1 October 2022 the Company had outstanding commitments for future minimum lease

payments under non-cancellable operating leases as follows:

2022

£m

2021

£m

Within one year 6.4 7.0

In more than one year but less than five years 21.6 20.9

In more than five years 43.8 47.6

71.8 75.5

9 PROVISIONS FOR LIABILITIES

Deferred

tax

£m

Property

leases

£m

Total

£m

At 3 October 2021 0.4 5.2 5.6

Provided in the period – 0.9 0.9

Released in the period – (0.5) (0.5)

Utilised in the period – (1.4) (1.4)

Unwind of discount – 0.1 0.1

Adjustment for change in discount rate – (0.6) (0.6)

Credited to profit or loss (1.3) – (1.3)

Charged to other comprehensive income 1.9 – 1.9

At 1 October 2022 1.0 3.7 4.7

Payments are expected to continue in respect of these property leases for periods of 1 to 22

years (2021: 1 to 23 years). There is not considered to be any significant uncertainty regarding

the amount and timing of these payments.

Deferred tax

The amount provided in respect of deferred tax is as follows:

2022

£m

2021

£m

Excess of capital allowances over accumulated depreciation 6.1 4.2

Other (5.1) (3.8)

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

166

NOTES CONTINUED

For the 52 weeks ended 1 October 2022

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.

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

2022 2021

Allotted, called up and fully paid

Number

Value

£m

Number

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

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167

ALTERNATIVE PERFORMANCE MEASURES

LFL sales

LFL sales reflect sales for all pubs that were trading in the two periods being compared

expressed as a percentage, excluding those pubs that have changed format between

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

the two periods being compared where it meets the definition of LFL. A site is considered fully

open for trading if it generated more than £100 per day. Current period comparisons have

been made against FY2019, being the relevant pre-COVID comparator period, and therefore

LFL sales excludes the results of the SA Brain pubs.

LFL sales is a widely used industry measure which provides better insight into the trading

performance of the Group as total revenue is impacted by acquisitions, disposals, and

investment into the estate through conversions and refurbishments.

NAV per share

NAV per share is the value of net assets of the Group, divided by the number of shares outstanding.

NCF

NCF is the decrease in cash and cash equivalents in the period, adjusted for movements in

other cash deposits, cash disposed of, and the cash movement in debt. NCF is used by the

Group to determine targets for LTIP awards.

Net debt

Net debt is defined as the sum of cash and cash equivalents and other cash deposits, less total

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

liabilities to below £1 billion.

Non-underlying

Non-underlying items are presented separately on the face of the income statement and are

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

users of the financial 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 leasehold property estate is an essential and significant area of the business, the

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.

Abbreviations

APM Alternative performance measure

CAPEX Capital expenditure

EBITDA Earnings before interest, tax, depreciation, and amortisation

FCF Free cash flow

LFL Like-for-like

NAV Net asset value

NCF Net cash flow

Definitions

APMs

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

tobe APMs. APMs should not be regarded as a complete picture of the Group’s financial

performance, which the Group presents within its total statutory results.

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

information to investors and other external shareholders to enhance their understanding of the

Group’s results and comparison with industry peers.

CAPEX

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

the level of investment in the estate to maintain the Group’s profit. Capex is the purchase of

property, plant and equipment as presented directly within the Group cash flow statement.

FCF

FCF represents the net cash inflow from operating activities, adjusted for cash movements on

interest, and proceeds from the sale of own shares. The Group uses FCF to determine bonus

outcomes for Directors’ remuneration.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

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168

ALTERNATIVE PERFORMANCE MEASURES CONTINUED

Reconciliation of APMs to Marston’s strategy

APM Closest equivalent

statutory measure

Link to corporate strategy

or goal

Link to ESG strategy

LFL sales Revenue Back to a billion (goal)

Achieving £1 billion sales

Communities

We want to generate

additional income to

increase our charitable

donations.

Capex Purchase of property,

plant and equipment

and assets held for sale

We will grow (strategy)

Links to the third element

of our strategy to deliver

high returning growth

capex.

Environment

We want to generate high

returns on energy efficient

technology expenditure.

FCF Net cash flow from

operating activities

We will grow (strategy)

Links to the third element

of our strategy to exploit

M&A opportunities.

Investors

We want to attract

long-term equity and

debt investors who

believe in and support our

strategy.

NCF Net increase/

(decrease) in cash

andcash equivalents

Net debt Total debt Back to a billion (goal)

Reducing net debt

(excluding lease liabilities)

to below £1 billion.

Investors

We want to drive

shareholder value by

reducing borrowings to

below £1 billion.

Underlying

operating

margin

Operating profit We raise the bar (strategy)

Links to the second

element of our strategy, to

achieve operational

excellence.

Environment

We want to improve

profitability by reducing

our energy usage.

Underlying

EBITDA

Profit/(loss) before tax

Operating profit/(loss)

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

defined in IFRS, however it is a generally accepted profit measure. ‘Pub operating profit/(loss)’

excludes the share of results from associates.

Outlet sales

Outlet sales represents all revenue that is generated at our managed and franchise pubs,

which includes food, drink, accommodation, and gaming machine income.

Profit/(loss) before tax

Profit/(loss) before tax is profit for the period for continuing operations presented before the tax

charge for the period. Profit/(loss) before tax is presented directly on the Group income

statement. It is not defined in IFRS, however is a generally accepted profit measure.

Retail sales

Retail sales represents all revenue that is generated through the Group’s EPOS (electronic point

of sale) till systems in our managed and franchise pubs, which includes food, drink, and

accommodation sales.

Underlying EBITDA

Underlying EBITDA is the earnings before interest, tax, depreciation, and amortisation, adjusted

for non-underlying items. The Directors regularly use underlying EBITDA as a key performance

measure in assessing the Group’s profitability. The measure is considered useful to users of the

financial statements as it is a widely used industry measure which allows comparison to peers,

comparison of performance across periods, and is used to determine bonus outcomes for

Directors’ remuneration.

Underlying operating margin

Underlying operating margin is the percentage of operating profit, before non-underlying

items, against total revenue.

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

169

ALTERNATIVE PERFORMANCE MEASURES CONTINUED

FCF

Statutory reference

2022

£m

2021

£m

Net cash inflow from operating activities Cash flow statement 134.0 34.7

Interest received Cash flow statement 0.9 0.5

Interest paid Cash flow statement (79.4) (96.3)

Proceeds from sale of own shares Cash flow statement – 0.1

Free cash flow 55.5 (61.0)

NAV per share

Statutory reference

2022

£m

2021

£m

Net assets Balance Sheet 648.1 406.4

Basic weighted average number of shares Note 9 633.1 632.8

NAV per share 1.02 0.64

NCF

Statutory reference

2022

£m

2021

£m

Decrease in cash and cash equivalents Cash flow statement (4.5) (8.5)

(Decrease)/increase in other cash deposits Cash flow statement (0.2) 1.2

Disposals Note 30 – 0.1

Cash outflow from movement in debt Note 30 30.9 125.3

Net cash flow 26.2 118.1

Reconciliation of APMs to statutory results

LFL sales

Statutory

reference

52 weeks to

1October

2022

£m

52 weeks to

28September

2019

£m

LFL

LFL retail sales 630.6 639.2 (1)

Non-LFL retail sales 103.5 61.7

Retail sales 734.1 700.9

Non-EPOS outlet sales 23.1 21.9

Outlet sales Note 3 757.2 722.8

10 weeks to

1October 2022

£m

10 weeks to

28September

2019

£m

LFL

LFL retail sales 13 7.9 133.8 3

Non-LFL retail sales 16.7 10.6

Retail sales 154.6 14 4.4

10 weeks to

1October 2022

£m

10 weeks to

2October 2021

£m

LFL

LFL retail sales 13 7.9 132.3 4

Non-LFL retail sales 16.7 13.1

Retail sales 154.6 145.4

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

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170

ALTERNATIVE PERFORMANCE MEASURES CONTINUED

Underlying operating margin

Statutory

reference

2022

£m

2021

£m

Operating profit/(loss) from continuing operations

Income

statement 145.4 (105.0)

(Income)/loss from associates

Income

statement (3.3) 14.5

Non-underlying operating items Note 4 (26.7) 96.2

Underlying operating profit excluding income/(loss)

from associates (‘pub operating profit’)

Income

statement 115. 4 5.7

Total revenue Note 3 799.6 401.7

Underlying operating margin 14.4% 1.4%

26 weeks to

2April 2022

£m

26 weeks to

1October 2022

£m

52 weeks to

1October 2022

£m

Operating profit 43.9 101.5 145.4

Loss/(income) from associates 2.0 (5.3) 3.3

Non-underlying operating items 6.0 20.7 (26.7)

Underlying operating profit excluding income/(loss)

from associates (‘pub operating profit’) 39.9 75.5 115.4

Total revenue 369.7 42 9.9 799.6

Underlying operating margin 10.8% 17. 6% 14.4%

Net debt

Statutory

reference

2022

£m

2021

£m

Decrease in cash and cash equivalents in the period

Cash flow

statement (4.5) (8.5)

(Decrease)/increase in other cash deposits

Cash flow

statement (0.2) 1.2

Disposals Note 30 – 0.1

Cash outflow from movement in debt excluding lease

liabilities 22.4 105.5

Net cash inflow 17.7 98.3

Disposals and classified as held for sale Note 30 – (0.1)

Non-cash movements and deferred issue costs (1.6) (1.6)

Movement in net debt excluding lease liabilities in

theperiod 16.1 96.6

Net debt excluding lease liabilities at beginning of

theperiod Note 30 (1,232.3) (1,328.9)

Net debt excluding lease liabilities at end of the period Note 30 (1,216.2) (1,232.3)

Underlying EBITDA

Statutory

reference

2022

£m

2021

£m

Operating profit/(loss) Income

statement 145.4 (105.0)

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

171

INFORMATION FOR SHAREHOLDERS

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 this

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

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.sharevote.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.marstonspubs.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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

172

INFORMATION FOR SHAREHOLDERS CONTINUED

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

• 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 Moorgate, 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

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0345 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

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

Private client fund managers – 30.07%

Private investors – 7.32%

Institutional investors – 62.61%

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.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

MARSTON’S PLC ANNUAL REPORT AND ACCOUNTS 2022

173

HISTORICAL KPIS 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 chargers 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

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.

2022

2021

3.3%

2020

(5.3)%

7.0%

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

2021

3.2

3.6

We’ve made changes to our KPIs during the reporting year. The following KPIs will not be

reported on from the 2022/23 FY.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION

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