Marston’s, the brewer and pub group, this morning said it was making good progress in each of its trading divisions, with sales growth in its managed pub arm up 2.4% for the 23 weeks to 12th March 2011.
The group, led by Ralph Findlay, said that performance in its managed arm was driven by a 4.7% increase in like-for-like food sales and like-for-like wet sales growth of 1.5%
In a trading update, the group said that comparable sales in the past seven weeks were 3.0% ahead of last year. Operating margin is also slightly ahead of last year.
At the company’s tenanted and leased pub arm, underlying profit trends have continued to improve.
Like-for-like profits were estimated to be 0.1% ahead of last year, which compares favourably to the 4% decline in financial year 2010.
The company said this improvement in performance was primarily due “to the continuing successful rollout of the franchise-style Retail Agreement, which will be operating in around 190 pubs by the half-year”
It said that the profit performance of the pubs, which will remain on traditional agreements for the long-term is ahead of last year.
Own-brewed beer volumes were up 4% across the period compared to last year, against a UK ale market down by around 7%.
The company said that its focus on localness and premium ale “continues to drive growth, with premium cask ale up 5% and bottled ale up 16% in the period”.
Net debt and cash flow are in line with our expectations.
The group said it was on target to open 20 new pubs in the year to 30 September 2011, and hd completed five new pub-restaurants to date with a further three due to complete in the next eight weeks.
It said that the remaining 12 pubs are on target to open by the end of the financial year.
The company reported that the performance of its new pub openings “continues to be ahead of our original targets, reinforcing the merit of the new-build strategy”.
Ralph Findlay, chief executive said: "The performance of the group in the year to date has been encouraging. Our consistent focus on offering our consumers value for money in high quality pubs, together with sector-leading shares in growth segments of the beer market, places us in a strong position for the future."
Reacting to this morning’s update Douglas Jack, analyst at Numis said: “We believe the risk to forecasts is on the upside, but are holding forecasts ahead of the Mother’s Day and Easter trading weekends. Before possible upgrades and re-rating, we estimate there is sufficient cash flow to drive 35% equity upside over two years.
“Marston’s is trading ahead of our targets of: 1.4% managed LFL sales; -1% tenanted/leased LFL profits; and 1% own-brewed volume growth. Marston's offers high single-digit earnings growth and a 6.2% dividend yield. Given this, an undemanding 8.4x EV/EBITDA rating (vs Greene King’s 8.5x) and increasing transparency on upgrade potential, we recommend buying at current levels.”
