A leading analyst has said that although Marston’s faces the hardest comps and has limited exposure to London, he expects the company to have made good progress over Christmas, moving trading further ahead of his full year forecast assumptions.
Douglas Jack at Numis said: “Premium & Destination LFL sales rose 3.1% in the first seven weeks to 23 November, driven by food being up 5% (with drink up 1%). The outperformance of food bodes well for LFL momentum. This, combined with a positive sector backdrop, should have enabled LFL sales to have strengthened further, to at least 3.5% in our view.”
Jack said that the group’s Premium & Destination EBITDA margins should be up, having grown by 92bps last year.
He said: “The estate grew EBITDA by 19% last year, growing the estate by 8% through opening new build pub restaurants (22 in 2013; 27 in 2014E; and 30 in 2015E). In addition to there being plans to mitigate all cost inflation this year, new outlets are generating c.30% EBITDA margins vs. a c.24% average for the estate.”
Jack said that Taverns’ managed and franchised LFL sales rose 2.1% in the first seven weeks to 23 November.
He notes that subsequent trading should have improved slightly aided by the disposal of 158 wet-led pubs (12%) from the Taverns estate and a favourable Christmas trading backdrop, with managed and franchised continuing to outperform tenanted. He expects Leased and Brewing to be stable, with the latter up against tough comps (of 5% volume growth).
Jack said: “We expect to hold our forecasts anticipating trading being ahead of our full year assumptions of 2.5% LFL sales in Premium & Destination and flat LFL sales in Taverns. The company should trade further ahead against soft snow-affected comps in Q2, in our view. We forecast interest costs falling by £5m this year, almost in line with 6% forecast debt reduction.
“Marston’s is repositioning its estate, selling wet-led pubs and recycling the capital into food-led new builds. Although this should result in 2014E being a flat year for earnings, we expect the attractive dividend payout to remain progressive, the balance sheet and earning quality to strengthen, leading to double-digit earnings growth in 2015E and 2016E.”
