Marston's Share Discussion Threads

[meijiman] 04/11/2019 09:35

Is the pub estate valued annually..I doubt it. Maybe tri-annually ...it will be in the accounts somewhere.

[cc2014] 04/11/2019 09:33

From Langton.

• The sale represents a book loss of £17m but, as the units generated EBITDA of only £30k each, they are not typical of the group’s estate and the valuation cannot be carried across to other units.
• Tails have a habit of re-growing and it makes good sense to address this periodically.
• This is sometimes because the pubs in question slide in terms of profit contribution etc but it is more often because the costs associated with running a pub increase and the units impacted would be better off under a different ownership structure.
• Here Admiral has become something of a specialist and the deal this morning announced could be something of a win-win.


I agree it doesn't look like a good deal but it appears it's been well telegraphed as the volume is low and if anything the share price is moving up suggesting the sale price is better than expected.
The company is doing what it comitted to do and therefore the City boys and girls are happy. Whether it's the right thing to do is another matter and whether MARS would have been better selling them at a later time into a strong market is another matter.

I'm happy enough to hold, the dividend is now more secure but I can't say I'm very attached to my shares.

[redartbmud] 04/11/2019 09:24

jeff

The debt is securitized on a good chunk of the estate. Wonder what questions the lenders are asking themselves?

The information does give an insight into pub operations in the current market climate.
Low-end wet-led pubs must be a big drag on the business, only trading marginally in profit, at best. How many other pubs, do they operate, on similar trading patterns? It doesn't take much to tip them into losses.

There are too many questions, with probable downside answers, and little positive light on the upside.

The dividend was frozen for 4 years. I hold ad a bond proxy.

Hmmmm...

[jeffian] 04/11/2019 09:01

Well I wish I could be so relaxed! A sale at 28% below BV and they don't even think it's worth a comment. Since the 2008/9 crash there has been huge scepticism about pub values and the more indebted companies like Enterprise and Punch fell over themselves to achieve an orderly write-down and show that they were able to sell pubs at or around BV. These assets underpin the balance sheet and are subject to annual revaluation review. No, it doesn't matter that they are the "fag-end of the estate", meijiman, one should still expect the valuation to be right, so I'm afraid it does raise a huge question mark over the rest.

[oldvic] 04/11/2019 08:54

clearing the decks,doing the washing up
take over target

[blobby] 04/11/2019 08:49

Thanks for the responses illis and meiji.

[davr0s] 04/11/2019 08:48

I just worry about share price as that determines what the big players think. Price is firm off the news - that tells me all I need to know

[skinny] 04/11/2019 08:47

Time to wheel these out again :-

Peel Hunt Hold 123.50 125.00 Reiterates

Shore Capital Buy 123.50 Reiterates

Liberum Capital Buy 123.50 125.00 Reiterates

[blobby] 04/11/2019 08:46

£17.7 million loss on disposal (2.8p per share) Net debt reduced by 2.3% but loss of operating profit of £3.7 million. Very strange.

[illiswilgig] 04/11/2019 08:39

I too wondered at the size of the discount to book value. I can only assume that these are the least profitable pubs with the lowest prospects in the estate and that Marstons will save as much in interest payments and costs as they would have made in profits? Overall neutral but debt is reduced which is perceived as good.

Remains to be seen whether the remainder of the planned disposal is at a similar level of discount to book value. If so then the perception of an inflated book value may outweigh the positive perception of reduced debt. I expect Marstons management are aware of this and maybe why the bottom end pubs have been disposed of first?

Seems to be borne out by the comment in this mornings Langton news email:

• The sold pubs’ operating profits were £3.7m.

• The sale represents a book loss of £17m but, as the units generated EBITDA of only £30k each, they are not typical of the group’s estate and the valuation cannot be carried across to other units.

• The sale of bottom end units will increase Marston’s average profit per pub by 7%.

• Group profit estimates are unlikely to change on the news, which represents a major step towards the group’s c£70m of disposal proceeds (and subsequent debt reduction) for the year as a whole.

[blobby] 04/11/2019 08:36

Reading the announcement, this does not seem like an attractive deal to Marston's so I'm confused by this action.

[semper vigilans] 04/11/2019 07:35

Might not be a stupid question.

[spacecake] 04/11/2019 07:21

Stupid question: Why have a book value a 1/3rd higher than the sale price and does it mean there are potentially more assets with book values much higher than achievable market valuations and does all that plug into the NAV per share valuation ?

[luderitz] 04/11/2019 07:20

Well that shouldn't do the share price any harm Skinny.

[skinny] 04/11/2019 07:02

.

Marston's PLC ("Marston's" or "the Group") is pleased to announce it has reached agreement for the disposal of 137 pubs for £44.9 million to Admiral Taverns. This disposal is in line with Marston's plans to reduce its debt in part through the disposal of certain non-core assets. The assets being disposed of are smaller wet-led leased, tenanted and franchised pubs. The deal is expected to complete before the end of November.


more.....

[davr0s] 17/10/2019 11:00

As I posted - one day event (well maybe two). Price pays not opinion or prediction

[evg] 15/10/2019 15:40

Great day trade on these today over 3% profit

[porsche1945] 15/10/2019 11:57

Glad i offloaded these, an accident waiting to happen, the debt level is truly ridiculous, another dividend trap. Capital raise on the cards id bet.

[blobby] 15/10/2019 11:47

Link to Langton Capital report:

hxxp://www.langtoncapital.co.uk/daily-notes/langton-capital-2018-10-10-pat-val-irregularities-marstons-hollywood-bowl-other/

[jeffian] 15/10/2019 10:22

Working hard, going nowhere.

[cc2014] 15/10/2019 09:55

Langton:

Marston’s has this morning reported its Q4 and year to date numbers and our comments thereon are set out below:
Trading – Summary:
• Marston’s is indicating that it believes PBT for the year will be around £101m. This implies a downgrade of circa £4m. EBITDA will be ‘broadly flat’ on the year
• Around £3m of this is due to somewhat less-buoyant trading in the group’s food-led pubs (in line with peer group comments and the Coffer Peach Tracker) and around £1m from higher interest and insurance costs
• PBT for FY20 will also be edged back to around £101m.
• The group reports that food-based sales will grow from a lower base and adds that £2m to £3m will be invested in on-site training, higher wages and digital marketing. Interest costs will rise modestly.
• The group reports that total revenue will be up c3% at around £1.2bn. Full year numbers will be reported on 27 November
• FY20 will feature a 53rd week but this ‘will offset the impact of the step-up in securitised interest (which reverses by c £3m in 2021).’
• Overall, the group says ‘we therefore expect underlying profit before tax in 2020 to be at a similar level to 2019, reflecting growth in underlying operating profits offset by increased disposal activity, additional pub investment and higher interest charges.’
Managed & Franchised Pubs:
• Total LfL sales are up 0.8%. This implies an increase of around 1.9% over the last 10wks
• Overall, margins will be lower. This was guided earlier in the year. Labour costs have risen and labour-scheduling, in a service business, can only go so far
Destination & Premium Pubs:
• Sales are +0.1% for the year as a whole, in line with the figure given for week 42
• Comps, however, were soft and the performance has been held back by sluggish food sales. Covers have been under pressure but wet sales have been strong
Trading – Taverns:
• Taverns LfL sales are up 1.9% for the year as a whole. They were up 1.1% at week 42 implying an acceleration to around +5.4% over the last 10wks.
• Wet-led sales have been strong. Q3 (which was reported at the end of July) was less good due to hot-weather comps and the World Cup last year
Trading – Beer Company:
• Beer volumes are up 1% overall. They had been +4% at week 26 but slipped in Q3 against hot-weather and World Cup comps
• At its Q3, Marston’s reported that its sales shortfall was largely as a result of reduced lager sales (Estrella Damm) into the off-trade. Unsurprisingly, the boost provided by the World Cup and continued hot weather last year was not repeated
Balance Sheet, Cash Flow & Debt:
• Marston’s reports that net debt should be around £1,399m at end-September, up around £14m on last year.
• A small increase in debt had been flagged up and some extra stock has been taken on ahead of 31 October, the latest Brexit deadline
• Marston’s was recently reported to be inviting bids for c150 tail-end pubs (for around £45m) and the group is indicating today that disposals should total around £70m (earlier estimate £40m) in FY20.
• The group has recently cut back on its opening programme in order to more rapidly pay down debt whilst maintaining its dividend.
• MARS has previously indicated its intention to reduce debt by around £200m. The higher level of disposals will accelerate this reduction, but the group will lose the EBITDA that the disposed pubs had previously generated
• MARS’ dividend is secure and, as the company is moving towards a position where it should generate around £50m p.a. after the payment of a maintained dividend, it will still be in a position where it can decide to either pay down debt further (by the £50m p.a.) or restart its new-build programme.
Conclusion & Outlook:
• CEO Ralph Findlay reports ‘our drinks businesses have performed well, achieving further growth against an exceptionally strong 2018.’
• He says ‘wet-led pubs have led the charge continuing their positive trajectory and food pubs have achieved modest sales growth.’
• Mr Findlay adds ‘operationally, we remain focused on further improving our proposition and plan to make additional investment in both our pub teams and digital marketing in the forthcoming year.’
• The group says debt will be reduced by £200 million and it concludes ‘we are making encouraging progress and have decided to increase the pace of our disposal programme this year to accelerate the achievement of this target.'’
Langton Comment:
• Marston’s strong performance in Q1 and Q2 faded over the tough comps provided by the hot weather and the World Cup last year.
• Today’s downgrades, whilst disappointing, reflect the reality that this was a tough year where margins have been hard to maintain.
• The group has benefitted from the recovery in wet-sales across the country as a whole but, again, comps have been hard to beat.
• Marston’s shares have been buoyed by the Greene King takeover approach and, given their performance and the tone of today’s statement, some further profit taking is likely.
• The shares are nonetheless not expensive. The yield is secure and, with debt coming down and a yield of 6% plus to support them, downside should be limited.
• Marston’s retains an estate of well-managed and well-maintained, largely freehold properties. It is selling product that the consumer would like to buy at a price they are prepared to pay. The moves it has announced today suggest that it intends to sharpen up its act in FY20.
• Lodges, craft brewing and food (in the longer term) remain growth areas. Marston’s is a major brewer and has a large wet-led element to its estate. Its managed houses are growing sales and holding margins. The group is well-placed to return to growth and to create further value for its shareholders.

[davr0s] 15/10/2019 09:22

RNSd often a 1day price action event so will just let it pass. Have my stop in the market if price wants to crater.

[gswredland] 15/10/2019 08:56

any guesses as to take out price?