Marston's slides to loss but cheers strong Christmas bookings

Annual results from Marston's (MARS) were released less than three weeks after the pub operator confirmed that chief executive Andrew Andrea would stand down with immediate effect. Justin Platt, the former Merlin Entertainments chief strategy officer who will take the reins in January, has a significant task on his hands to rejuvenate the share price, which is stuck far below pre-pandemic levels. 

Like-for-like (LFL) sales rose 10.1 per cent against last year, with food and drink spend rising by 8.1 per cent and 8.6 per cent respectively. Momentum slowed after the year-end, with LFL sales up 7.4 per cent, although management flagged that Christmas bookings are ahead of last year. 

Elsewhere, income from the company's joint venture with Carlsberg (DK:CARL.B) tripled to £9.9mn. 

Despite revenue growth getting the company closer to returning to £1bn in annual sales, it fell into the red as £21.6mn of losses on interest rate swap movements and £31.2mn of property impairment charges dragged it down. 

Looking ahead to the medium term, management is targeting a 200 basis point uplift in margin. The underlying profit margin was flat in the year at 14.3 per cent, on increased operating profits of £125mn.

Analysts at Peel Hunt argued that the 9.8 per cent increase in the national living wage, which is coming in April, "should be mitigated by adjusting prices from one of the lowest price points in the sector and the acceleration of the cost efficiency programme". 

The valuation is cheap, with the shares trading hands at just four times forward consensus earnings. But as we have noted before, the hefty discount to net asset value could also highlight justified market disinterest. Hold. 

Last IC view: Hold, 35p, 16 May 2023