Analysts have responded to Marston’s trading update this morning, with Douglas Jack, of Numis, reiterating his Buy recommendation.
He said: “Q1 trading is in line, with all divisions in positive territory, even though comps were tough and should ease into H2. As a result, we are holding our forecasts, which anticipate a return to double-digit earnings growth this year, in addition to which the dividend is yielding c.5%.
He said he assumed like-for-like sales would grow 2.5% in P&D, 2% LFL sales growth in Taverns, 1% LFL profit growth in Leased and slightly positive Brewing volumes. He said overall, the company was trading in line, but with easier comps ahead (P&D: Q1 4.1%; and Q2-4 2.7%. Taverns: Q1 3.0%; and Q2-4 1.7%).
He added: “We forecast a return to double-digit earnings growth this year, with net debt/EBITDA falling 0.3x despite the attractive dividend, yielding c.5%. Although comps are tough in H1, they ease in H2 and the consumer backdrop is favourable, with Longview forecasting a 3.5% increase in real post-tax discretionary cash flow this year.
Mark Brumby, of Langton Capital, said: “Marston’s has confirmed that trading continues to be in line with expectations. It has suggested that the busy days have remained busy and has suggested that, in line with comments made by other operators, December excluding the holiday days was satisfactory but not outstanding.
“The growing importance of the ‘big days’ does leave revenues (along with those of other operators) open to more potential for weather or other shocks.
“That said, with its new-build programme still firmly in place, much of Marston’s success has been of its own making.
“The group has not been aided by geography as it operates a largely provincial estate.
“Earnings are set to move forward this year and next as the group has now worked through the period of dilution caused by the disposal of its bottom-end, tenanted units.
“The group’s shares trade on an undemanding 11.6x this year’s earnings falling to 10.6x in FY16. The yield is a healthy 4.8% this year and 5.0% next.
“Consumers remain value-driven but confidence is returning and the outlook is brighter than it has been for some time. Real wages are growing, unemployment continues to fall and there may be tax cuts in March’s Budget. Interest rate rises may not kick in until 2016 and we would suggest that Marston’s strongly asset-backed shares offer good value.”
