Marston's unveils pub acquisition but profits disappoint
Marston's
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16:49 26/04/24
Brewer and pub operator Marston's said full year profits will bubble up 4%, which is slightly less than analysts expected.
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The company, which dropped out of the FTSE 250 in May, said a good summer, where trading was boosted by the World Cup and warm weather led to turnover frothing up 15% to more than £1.1bn.
Pub sales increased 3.2%, with like-for-like sales growth of 0.6% and a contribution from opening 14 pub restaurants and bars and seven lodges in the year. In the most recent 10 weeks, LFL sales were up 1.6%, with taverns in line with the rest of the year and the Destination and Premium pubs stopping the rot seen earlier in the year with flat sales in the final quarter and margins declining less than peers.
However, while operating profits improved in each of its trading segments, underlying profit before tax is expected to come in at close to £104m, around 2.5% below consensus due to higher interest charges.
"Although trading in Destination food-led pubs was weaker, this predominantly reflects issues beyond our control relating to unseasonal weather extremes and the World Cup," said chief executive Ralph Findlay. "However we are encouraged that our dining pubs are now seeing improving momentum and we expect to make further progress in 2019."
The beer division increased volumes 47% in the year, boosted by the Wells acquisition last year, increases in market share and new distribution contracts meaning that roughly 90% of 'own brand' volume is now sold outside Marston's own pubs.
The company also has agreed the acquisition of 15 former Mitchell's & Butlers' pubs from Aprirose, a property investment company. Well located community pubs, the portfolio is said to be "highly complementary" to the business model and management expect to complete and lease-fund the deal in the first half of next year, with a £4m investment pencilled in and a target EBITDA of around £0.5m in 2019 and at least £1m in 2020.
Findlay said Marston's was meeting the demands of punters and managing the inflationary cost environment "well", a combination that "gives us confidence for the future".
Marston's shares, having rallied in recent weeks after hitting multi-year lows below 90p in early September, were down almost 3% to 98.3p by early afternoon on Wednesday.
Broker Numis saw the update as showing a "strong performance from wet-led pubs/tenancies during the year was offset by the weak market for pub restaurants over the summer".
The 50 basis point fall in the destination and premium operating margin was expected and implies only only a 30bp decline in the second half. "This compares well to peers (average -70bp) which MARS attributes to a disciplined approach to discounting."
Analysts at Shore Capital expect further operating profit progress of circa £6m in 2019, primarily from the D&P pubs from both new pubs and soft comparatives and further growth in the Beer Co, although this is likely to be modestly tempered by higher interest.
ShoreCap forecasts PBT for the next year of £108.5m and EPS of 14.1p, while Numis has gone for £107.9m and 13.8p.
Paul Hickman, analyst at Edison Investment Research, said the pubco "typifies Britain’s pub presence in large and small communities", is signalling a good outturn for its pub and beer businesses.
The shares are cheap at a 7.1 P/E for the year to September 2018, lower than the dividend yield of 7.8%, and these firm results should help to allay any fears of weakness leading to a dividend cut.”