A leading analyst has cute his 2013E forecast for Marston’s by 3% following Mitchells & Butlers’ (M&B) poor September update and the pick-up in disposal activity.
Ahead of Marston’s FY trading statement, which is due on 9 October, Douglas Jack at Numis said: “Although trading picked up in Q3, with Premium & Destination LFL sales up 6.0% and profits recovering to being flat in both Taverns and Leased, we are cautiously cutting our 2013E forecast.”
“We expect a continued improvement in year-to-date LFL sales due to food (up 3.7%), which is more sustainable, rather than drink (up 0.5%) being the driver behind Q1-3’s LFL sales increase. Following 16 openings in Q1-3, our forecasts anticipate six new build openings in Q4. Overall, we expect D&P profits to increase by over 25% in H2 and by over 20% over the full year.”
The group’s Taverns’ profit (39% of group EBIT) is evenly split between wet-led managed , franchised and tenanted pubs.
Jack said: “Of these, we expect franchised to be trading strongest, followed by managed (which should convert to franchised over time) and then tenanted (which is where disposal activity and our forecast adjustment are occurring).”
The company#s Leased (14% of group profit) LFL profits were flat in Q3, having been down 5.8% in H1, with both rent and beer volumes returning to level.
Jack said: “We forecast full year LFL profits falling 2%. Brewing (9% of group profit) volumes rose 6% in Q1-3 driven by strong positioning (to premium ale) and Fastcask.
“For 2013E, we have cut our PBT forecast to £89.6m (from £92.5m; consensus £92.9m) to reflect tougher market conditions in September and accelerating disposal activity. We are cutting our 2014E forecast to £94.0m (from £99.0m; consensus £99.0m) largely by anticipating dilution from tenanted pub disposals (£3m) and IAS19 (£2m).
“Our pre-emptive forecast adjustments mostly reflect faster disposal activity (peaking at c.230 pubs in 2014E in our forecasts) which Marston’s have alluded to for some time. As tail-end wet-led pubs are only likely to trade worse, we believe this is the right strategy (despite the earnings dilution) provided the company recycles the disposal proceeds by stepping up the roll out of higher-return, more sustainable new build pub restaurants.”
