A leading analyst has said that Marston’s is well placed to accelerate growth and that he expects trading for the company to have picked up aided by easier comps and more favourable weather, when it updates the market next Thursday.
Douglas Jack at Numis said: “C.23 new builds should open this year, following nine openings in H1. This together with 18% average cash returns (vs. 16.5% target), helped Premium & Destination’s EBIT to rise 10% in H1. This division should be Marston’s growth engine over the next few years, during which it is scheduled to receive two-thirds of group capex.
“We believe Marston’s is well placed to accelerate growth with interest costs starting to fall next year and only 1% price increases needed to offset lower inflation. Our 2013E forecasts imply a 14% underlying PBT growth rate (pre snow and higher securitisation costs), which implies upside for our 7% 2014E PBT growth forecast, given 2014E’s £1.5m of additional cost savings. The shares, on 10% calendar EV/EBITDA discount to Greene King, are attractive, in our view.
“Premium & Destination (38% of group profit, 339 pubs) LFL sales were up 1% over the first 32 weeks following a 6% increase in weeks 27-32 (food +9%; drink +3%). Excluding snow-affected weeks, LFL sales would have been up almost 4% in weeks 1-32, so against easier managed pub comps (H1 3.6%; Q3 1.6%; Q4 2.2%), LFL sales should be accelerating.
“Taverns (39% of group profit, comprising 863 franchised/tenanted pubs,156 managed pubs and 379 pubs awaiting disposal) LFL profits fell 5.6% in H1 due to poor weather. Of the estate’s 1,398 pubs, the c.600 franchised pubs grew LFL profits by 10%. Of the other c.800 pubs, 379 should be sold and the balance converted to franchised. The division was in LFL profit growth in early Q3.
“Leased (14% of group profit, comprising 391 pubs) EBIT fell 5.8% in H1 again due to poor weather, but also returned to LFL profit growth in early Q3.
“Brewing (9% of group profit) EBIT was flat in H1 against a backdrop of ale volumes rising 8%, outperforming the market on both metrics. This reflects the success of Fastcask and a positioning towards localness and premium ales, both areas of growth.”
