A Message from the Chairman

Dear Shareholder

In 2011 we made good progress towards our three key objectives: of generating sustainable growth, of increasing return on capital, and of reducing debt ratios.

Our strategy is differentiated in three areas. First, our focus is on new-build managed pubs. Second, we have introduced franchise agreements, and have increased our support to the traditional tenanted and leased estate. Third, our ale brand development is based upon local beers with genuine provenance.

Each of these is underpinned by the objectives of enhancing service both to our consumers and our trade customers, while at the same time offering outstanding value. It is manifest that this strategy is appropriate to current market conditions.

We propose a final dividend of 3.7p, unchanged compared to last year. The total dividend for the year is thus 5.8p, also unchanged compared to last year, and representing dividend cover of 1.9 times, up from 1.7 times in 2010.

As announced last year, a number of Board changes were made on 1 October 2011. The number of Executive Directors reduced from five to three, with Alistair Darby appointed as Chief Operating Officer.

Derek Andrew retired from the Group after 31 years' service, and is replaced as Managing Director of Marston's Inns and Taverns by Peter Dalzell. We thank Derek for his excellent contribution.

Stephen Oliver stepped down from the Board, and is appointed Managing Director of Marston's Beer and Pub Company, created through the combination of our tenanted and leased estate with our brewing operations.

Miles Emley, Non-executive Director, has informed the Board of his intention to step down after the Annual General Meeting on 27 January 2012 after 14 years' service. Miles has made a significant and steadying contribution during a turbulent decade or so in our industry.

We expect the environment to remain challenging for the foreseeable future, and have cut our cloth accordingly. Economic pressures on energy, commodity and labour costs will be mitigated substantially through tight cost management and effective purchasing, but the scale of increases in regulatory costs, business rates and alcohol duty needs to be addressed by this Government if opportunities for growth in leisure businesses are to be exploited.

This year, we have supported the Government's Responsibility Deal, its health awareness initiatives and Drinkaware. We welcome the Government's response to the Business, Innovation and Skills Select Committee's report and, in particular, that self-regulation is supported as the best means of implementing a range of substantive reforms to the operation of tenanted and leased pubs. The Framework Code of Practice requires higher standards of care in the appointment of licensees and will be further strengthened through these reforms. Each of these actions demonstrates our commitment to the highest standards in our dealings with consumers and customers.

We have a clearly defined strategy for continued profitable development. This seeks to improve the fundamental ratios of return on capital, of debt and of dividend cover. We aim to sustain our momentum through 2012 and beyond.

David Thompson
Chairman
30 November 2011