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Marston's goes on acquisition spree

The pub and brewer group has bought the Charles Wells brewing business, funded by a share placing
May 19, 2017

Marston's (MARS) trumped the announcement of its first-half figures with a share placing-funded acquisition spree. It bought the Charles Wells Brewing and Beer Business, which for £55m will add more than 30 brands to Marston's portfolio, including Young's, Bombardier and McEwan's. This month, Marston's has also acquired seven food-led 'destination' pubs and three Pointing Dog premium pubs. To fund the deal, the company successfully placed 57.6m shares at 137p a share; knocking the market price on the day.

IC TIP: Buy at 142p

Chief executive Ralph Findlay said that the Pub Code, which came into effect last year and allows some pubs to break the 'beer tie' with their owner, should not have a material impact on the company. Only around 11 per cent of its estate are tenanted and leased pubs, and only "a handful" of these have broken the tie, he said. The later timing of Easter this year acted as a £1.5m drag on the first half's pre-tax profit, and group margin fell slightly, from 16.4 per cent to 16.1 per cent, but is expected to recover in the second half.

Analysts at Peel Hunt expect full-year pre-tax profits of £105m for the year to October 2017, but expect earnings to stay flat at 13.7p as a result of the enlarged share capital (£98m and 13.8p in FY2016).

MARSTON'S (MARS)
ORD PRICE:142pMARKET VALUE:£818m
TOUCH:142-142.3p12-MONTH HIGH:157.6pLOW: 126.8p
DIVIDEND YIELD:5.2%PE RATIO:10
NET ASSET VALUE:138p*NET DEBT:167%

Half-year to 1 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201644422.84.22.60
201745236.75.22.70
% change+2+61+24+4

Ex-div: 25 May

Payment: 4 Jul

*Includes intangible assets of £264m, or 46p a share