Operating margins at Marston’s (MARS) held firm in its first half, as a rise in profits in the brewing division and an increase in the overall top line helped to keep the pub group balanced on its debt-and-dividend tightrope for another 26 weeks.
Two factors mitigated downward pressure on prices and upward pressure on labour costs. Both are investments: better point-of-sales technology to help staff manage stock, and the installation of energy-efficient equipment to bring down on-site bills.
News that capital expenditure is being cut, in a bid to reduce the £1.44bn net debt pile, could therefore be viewed as a concern. Alternatively, Marston’s can always sell some of its pubs and bank cash post-haste. Some £170m of disposal proceeds – primarily from the “lower end of the estate” – are now targeted over the next four years, and chief executive Ralph Findlay believes yield-hungry and alternative-use buyers are prepared to pay similar multiples to those fetched by fellow publican Ei Group in its recent 348-site sale.
Analysts at Numis expect pre-tax profits of £108.5m and earnings of 14.2p a share for the 12 months to September 2019, rising to £116m and 15.2p in FY2020.
| MARSTON'S (MARS) | ||||
| ORD PRICE: | 107.9p | MARKET VALUE: | £684m | |
| TOUCH: | 107.7-107.9p | 12-MONTH HIGH: | 112p | LOW: 89p |
| DIVIDEND YIELD: | 7.0% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 142p* | NET DEBT: | 160% | |
| 26 weeks to 30 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 529 | -13.4 | -2.0 | 2.7 |
| 2019 | 553 | 19.1 | 2.6 | 2.7 |
| % change | +5 | - | - | - |
| Ex-div: | 23 May | |||
| Payment: | 2 Jul | |||
| *Includes intangible assets of £301m, or 47p a share. | ||||
