Marston himself seems an easy survivor. A balance sheet with net debt of £ 1.33 billion is over-leveraged, but less than that of some peers. Borrowing actually fell by £ 70million last year, although the flows were helped by pub cessions, VAT and duty deferrals and holidays. The freehold estate will not be worth the £ 2.2bn it was valued at in 2018, but the borrowings should still be comfortably asset-backed.
The share price has been hammered by uncertainty – Marston’s market value is now just £ 290million – but there are no signs of a financial crisis. There is £ 230million in cash to come from the beer company’s merger with Carlsberg in the UK – a joint venture in which Marston’s will have a 40% stake. He can afford to let an additional £ 70million loan facility agreed in May fall unused next month.
But level 2 restrictions are the worst for ads. As UK Hospitality, the commercial body, puts it, it is a “no man’s land” where the doors remain open but custom is struck and operators do not benefit from the employment support available at level 3.
Marston will get by, but a 15% reduction in staff at a national and stable operator is significant. This shows the speed of layoffs in the sector. If Chancellor Rishi Sunak intends to offer Level 2 employment support, now is the time.
The credibility of the advertising regulator will be at stake
Elsewhere in pubs, there was a show some thought they’d never see: The Pub Code Arbitrator (PCA) fining a major brewer. Heineken has been hit for £ 2million for allegedly ‘repeatedly and seriously’ breaking rules designed to protect the rights of pub owners, the misleading term for people who in this case are actually tenants.
Heineken was found to have imposed unfair conditions on people seeking to free themselves from contracts requiring that a certain amount of beer be purchased from the company that owns the pub, or pubco. The right to “tie-free” was enshrined in the 2016 legislation and, in return, the pub operator must forgo a reduced rent and pay “market” rent to the pubco.
The definition of a market rent has been a common plague. The same goes for the precise detail of a free trader’s freedom to shop around the stock. The tenants complained of being sidelined by lawyers and accused the PCA of failing to protect them. For their part, the pubcos complained about the referee’s lack of advice.
Fiona Dickie, who heads the PCA, has clearly been stung by critics. “My message is that if anyone previously had doubts about my resolve to act when I discover violations, they can no longer doubt it now,” she said.
In that case, she had better win in the High Court, where Heineken intends to appeal the decision. The credibility of the APC is now firmly at stake.
AO World owes so much to Covid
You did well if you bought Ocado shares for the pandemic. You did even better if your online retail choice was AO World, the former Bolton-based supplier of refrigerators, freezers and televisions. The share price was 50 pence at the end of March, but it is now 302 pence, up 30% on Thursday with news of a 57% increase in first-half earnings and confidence that the transaction Germany will soon make a profit.
There is still a long way to go before AO’s new and ambitious “all employee” incentive program hits first base at 520p. Serious money starts at 941p, and targets go all the way up to £ 12, at which point the windfall to be shared among employees, who are currently around 3,000, would be £ 240million.
But it’s a five-year program, so there is time. And, remember, a lot of people thought that AO would never regain its float price of 285 pence in 2014. It has now happened. Suddenly, founder and CEO John Roberts’ speech about how Covid accelerated the company’s prospects for years to years doesn’t seem so dreamy anymore.