Simon French, analyst at Panmure Gordon, looks ahead to Marstons’ pre-close interim management statement, announced next Wednesday (9 October).
French predicted a “relatively subdued announcement reflecting Mitchell’s & Butlers downbeat comments on recent trading”.
“We therefore estimate FY LFL sales growth of 1.5% in Premium & Destination pubs implying -1.0% in the last 10 weeks. Accordingly, once again we trim our FY 2013E earnings estimates by c0.4% to £92.1m PBT (12.6p EPS) [against consensus estimates of £92.5m PBT (12.7p EPS)].
“This is disappointing, and suggests that the c£46m of net capex spent over the last 24 months has delivered unacceptably low returns.
“Yet management is adamant that new-build managed pubs are delivering c17% EBITDA returns, so underlying Taverns and Leased pubs performance must be even more disappointing than the headline numbers suggest.
“We expect management will accelerate capital allocation into new build managed pubs but we are unconvinced this is the right course of action, as it heightens executional risk. Therefore despite the valuation discount to Greene King (CY 2014E adjusted EV/EBITDAR of 8.4x compared to 9.6x) we reiterate our Hold recommendation and 135p Target Price.”
