Marston’s has this morning reported a 2.9% increase like-for-like sales in its managed pubs division for the year 1 October, driven by the popularity of its food offer. The group described the momentum in its trading performance in the period as “encouraging” despite the difficult trading environment. The brewer and pub operator, which operates around 2,150 pubs in total, said that its earnings before tax and exceptional items were in line with its expectations, with improvement across all of its trading divisions. At Marston’s Inns and Taverns, its managed house division, like-for-like food sales grew 5% over the year with like-for-like wet sales up 1.8%. It said that like-for-like sales for the 10 weeks to 1 October were up 2.9%. It said that food now accounts for 42% of total sales, a 2% increase on last year, with its value-for-money food offers remaining “attractive to our customers”. The group said that margins were slightly ahead of last year. In Marston’s Pub Company, its tenanted and leased pubs division, underlying profit trends have continued to improve. Like-for-like profits are estimated to be 0.6% ahead of last year. It attributed the improvement to a combination of continued profit growth from its pubs operating on long-term traditional agreements, and the continued rollout of its franchise-accredited Retail Agreement. It said that the new agreement is now operating in around 330 pubs against a target of 600 pubs by 2013, and performance is in line with expectations. Its own brewed beer volumes are up around 2% on last year at Marston’s Beer Company with premium cask ale volumes up 5% and bottled ales up 6%. The group said it expected divisional profit for the year to be slightly ahead of last year. The company said it had completed 19 planned developments for 2011, with completion of the 20th site expected shortly. It expects to open an additional 25 new pub-restaurants in the new financial year. It said that the returns achieved from the new-build programme continued to exceed its original targets. The group said that both net debt and cashflow remained in line with its expectations. Ralph Findlay, chief executive, said: “We have been very encouraged by the performance of all areas of our business this year. The objectives of our clearly defined strategy are sustainable growth, higher investment returns, and reduced gearing. Our operational focus on offering value for money to our customers together with high service and quality standards is helping us achieve those objectives.” Analyst reaction Douglas Jack at Numis said that the pub group’s trading remained strong and consistent, reiterating a Buy stance for its shares with a 130p a share target price. He said: “Marston’s full year trading update is strong, with LFL trends being maintained and EBIT growing in all divisions despite weaker consumer confidence. We are holding our forecasts, which estimate 13% earnings growth in H2 2011E. We view Marston’s as a core sector holding, offering defensive growth and an attractive dividend (yielding 6.5%). “We are holding our full year forecasts which assume managed pub LFL sales rise by 2.5% and that leased average profits rise by 2.4% versus 2.3% in H1. We estimate there is £16m of upside to forecasts over the next four years if recent average new build returns and Retail Agreement profit uplifts continue. “The managed pubs’ value food positioning, the new build programme and the success of Retail Agreements provide a basis for consistent growth. We view its domestic exposure, with limited reliance on the financial markets (the City) and inbound tourism as attractive. The company is also well-placed to benefit if pressure on inflation eases.”