A leading analyst has said that Marston’s is well placed to slightly beat 2012E PBT, which he forecasts to be up 8% to £87m (consensus £86.9m), when it announces its full-year results next Thursday.
Douglas Jack at Numis said: “Due to slightly better than expected trading in the managed estate, the company is well placed to slightly beat 2012E PBT. Either way, we expect to hold our 2013E forecasts, which are supported by positive trends in all three divisions and strong growth/returns from new builds and Franchise Agreements.”
He said that round 500 pubs should now have been converted to franchise; c.100 conversions are expected in 2013E.
Jack said: “Managed pub LFL sales rose 2.2% in 2012E, with margins up, slightly ahead of our forecast assumptions. 25 new build pub restaurants opened during the year. By generating strong cash returns (historically above 18% for freehold assets), these are generating shareholder value, as reflected in the revaluation (new builds’ average value rose over 50% to £3.6m+ versus a sub-£2.4m cost) without flattering LFL sales. As openings have been back-end loaded, most of their profits will occur in 2013E.
“Tenanted profits rose c.3% over the full year, the strongest performance in that sector, with the core estate up 0-1% (undermined by poor weather in H2) and the franchised estate up strongly. Around 500 pubs should now have been converted to franchise; c.100 conversions are expected in 2013E.
“Brewing volumes were up 2%, ahead of a market in which beer volumes fell 3.2% (on trade -3.6%; off trade -2.8%) over the same period. We expect brewing profits to be up 1%, with an increased share of lower-margin off trade business offsetting a reduction in cost pressure in H2.”
Jack said he expects to hold his 2013E forecasts for which the outlook is supported by costs being largely locked-in at levels that can be offset by a 1.2% price rise in the managed estate.
He said: “Our assumption that managed LFL profits fall 1.9% is possibly over-cautious, particularly as 2013E should benefit from easy weather-related comparatives. We estimate Marston’s self-financed earnings growth and attractive dividend yield are capable of generating a 24% increase in equity value in 2013E, without any change in the EV/EBITDA rating. Despite the recent share price recovery, we would add to holdings at these levels (8.6x EV/EBITDA 2013E).”
