A leading analyst has said that the full-year results from Marston’s, which were announced yesterday, were solid in an overall market which remains difficult and where trading patterns are volatile.
Geof Collyer at Deutsche Bank said: “Retail profits were up through +2% lfls and the new build programme, partly offset by disposals. 25 sites were opened in the year (back-end loaded), with
20-25 new sites for 2013, all of which are already in the bag. Two-thirds of capex in Tenancy & Lease is holding the core tenancies flat. The other third is going into the Franchise estate, which is generating all of the growth.”
Yesterday Marston’s said it had written up its new-build estate by 56% and the rest of of its Retail by
9% (+19% in total).
Collyer said: “26% of the T&L estate (436 pubs) has been written down by 50% on a ‘priced-to-go’ basis. The scale of the downgrade is partly because the group has not revalued for five years (during which time the peer group has been writing down its estates by between 14% and 30%). The disposal estate includes 100 of the recently converted franchise pubs which have benefitted from average capex/pub of £50k over the past 2-3 years so the underlying write-down in these sites is even greater. Conversely, Marston’s will be hoping to sell these for a reasonable premium above the £264k average new value to recover the recent investment.
Collyer said that the +2% lfls guidance plus the 5% DIV yield will provide support.
He said: “We have put through margin changes to our forecast. The key movements are (i) knock-on impact of missing Retail forecasts in 2012. (ii) Stronger growth in the franchise pubs within Tenancy & Lease. We have already adjusted of the dilutive impact of selling off the bottom 26% of the Tenancy estate. (iii) We have adjusted down the Brewing margin. Target price and recommendation retained.”
