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Marston's builds value

RESULTS: Marston's post-credit crunch growth strategy continues to create value for shareholders
November 29, 2012

Pub and beer company Marston's (MARS) had a strong year, with underlying EPS having risen 10 per cent in the period. It has started the new financial year in fine fettle, too, and managed pub like-for-like sales rose 2 per cent in the first eight weeks, with an estimated 3 per cent profit increase at tenanted pubs. That underlines the success of a multi-pronged strategy adopted following the credit crunch. "We've absolutely adhered to the strategy," says chief financial officer Andrew Andrea. "It's the bedrock of our success."

IC TIP: Buy at 124p

The plan to build new pubs focused on food in high footfall locations continues to deliver - new builds were valued at 56 per cent more than build cost in a recent five-yearly estate revaluation. And, overall, managed-pub profits grew 4.5 per cent at £74.2m and the profit margin nudged up 20 basis points to 18.3 per cent. Moreover, the introduction of a franchise-style lease agreement a few years ago is invigorating the tenanted division, which boosted profits by 3.2 per cent to £81.8m. Some 436 tenanted pubs have been written-down in value and earmarked for disposal as part of the recent revaluation. Brewing, meanwhile, is benefiting from premium ale and a local focus with 2 per cent volume growth.

Broker Numis Securities expects pre-tax profit of £96.5m for 2013, giving EPS of 13.1p and a 6.41p dividend (2012: £87.8m/12.2p).

MARSTON'S (MARS)
ORD PRICE:124pMARKET VALUE:£708m
TOUCH:123-124p12-MONTH HIGH:128pLOW: 87p
DIVIDEND YIELD:4.9%PE RATIO:na
NET ASSET VALUE:133p*NET DEBT:147%

Year to 29 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200866676.216.39.50
200964521.43.907.10
201065152.58.305.80
201168280.812.15.80
2012720-136-19.46.10
% change+6 - -+5

Ex-div: 12 Dec

Payment: 28 Jan

*Includes intangible items of £248m, or 43p per share