A leading analyst has said that he believes Marston’s repositioning (selling wet-led pubs, recycling capital into food-led new builds and converting the Taverns estate to franchise) should lead to double-digit earnings growth in 2015E and 2016E, which should bolster an already attractive dividend pay-out, whilst strengthening the balance sheet and earnings quality.
Douglas Jack at Numis said: “For the H1 results, due on 15 May, we are forecasting H1 PBT to be up 3% to £28.5m. Pre-disposals (including the NewRiver deal), we estimate PBT would have been up 11% in H1 (with EBIT £6m higher; and interest £4m higher), but the decision to accelerate the repositioning to food-led managed pubs was right in our view, creating a platform for strong double-digit growth from 2015E.”
Premium & Destination (P&D) LFL sales rose 4.1% during the first 15 weeks (food +5.6%; drink +2.2%).
Jack said: “Due to this, expansion (27-28 new builds should open this year; with 11 in H1) and plans to mitigate all cost inflation this year, margins should be up slightly, in our view. Helped by easy comps in March, we expect LFL sales to have strengthened in Q2. Overall, we are forecasting an 18% increase in P&D’s H1 EBIT.”
Taverns’ managed and franchised LFL sales rose 3.0% during in the first 15 weeks.
Jack said: “Managed (c.130 pubs) and franchised (c.600 pubs) outperformed tenanted (c.150 pubs) and the c.150 pubs awaiting conversion to franchised. Although we expect LFL sales to have strengthened in Q2, we forecast H1 EBIT to be down 18% due to disposals.
“Leased profit rose 1% during the first 15 weeks. We are forecasting flat profits in H1 despite the loss of £1m (7%) of H1 EBIT through the NewRiver Retail disposal. Similarly, we are forecasting flat H1 profits inBrewing based on our expectation of volumes being down slightly against tough comps of +8%.
“We expect to hold our forecasts even though trading should be ahead of our full year assumptions of 2.5% LFL sales in P&D and no LFL profit growth in Leased. This allows for tougher LFL comps in H2, particularly in P&D (H1: 0% / H2: 4%). For example, we expect only moderately positive LFL sales from P&D in early H2 against a tough comp of +6%.”
