Marston's Share Discussion Threads

[defcon3] 08/6/2017 19:33

Marston's, one of the UK's leading pub operator and independent brewer, yesterday announced its interim results for the 6 months ended 1 April 2017 ('H1 FY2017'). During the period, on an underlying basis, revenue advanced by +2.8% to £440.8m, pre-tax profit rose +2.7% to £33.7m, leading to basic earnings per share of 4.8p, up +4.3%, against the comparative period (H1 FY2016). On a statutory basis, revenue advanced by +1.6% to £451.5m, pre-tax profit jumped +61.0% to £36.7m resulting earnings per share improved by +23.8% to 5.2p, due primarily to the mark-to-market movement in the fair value of certain interest rate swaps. Net debt at the period end was £1,322m (end H1 FY2016: £1,272.5m), representing net debt to underlying EBITDA ratio of 5.0x (H1 FY2016: 5.0x), excluding property leases with freehold reversion entitlement. On the operational front, the Group opened 4 new pubs and bars and 3 lodges, taking estate to over 1,000 rooms. On a separate announcement, the Group confirmed acquisition of Charles Wells brewing business ('Charles Wells') from the Charles Wells Group for a cash consideration of £55m. The Group also announced that it will acquire 7 pubs in "strong" locations to enhance its Destination and Premium estate for a consideration of £13m with a refurbishment investment of £3m. To fund these acquisition, the Group yesterday completed a placing to raise £78.9m before expenses (9.9% of the Group's issued share capital) at a price of 137.0p per share. Marston's CEO, Ralph Findlay commented "Our market position will be enhanced by the acquisition of Charles Wells Brewing and Beer Business and we remain confident our strategy will continue to create value for shareholders". The Group declared an interim dividend of 2.7p per share, up +3.8%, to be paid on 4 July 2017.Our view: Marston's reported a good performance in the H1 FY2017, despite Easter falling into the H2 which impacted some £1.5m of its pre-tax profit. Underlying revenue growth of +2.8% was supported by both like-for-like sales growth in all businesses, new openings and growth in its beer brands. The Group's operating margin declined by -0.3% to 16.1% due to slight dip in both Destination and Premium and Taverns, despite Leased and Brewing improved. It's Brewing business also expanded its market share to 26% of premium bottled ale and 19% of the premium cask ale markets. The acquisition of Charles Wells is encouraging move. Charles Wells has a portfolio of over 30 beers including leading brands such as Bombardier, Young's and McEwan's, as well as holding UK distribution rights for the Estrella Damm lager brand and other beers under license including Kirin and Erdinger. Purchase price of £55m equates to 9.0x current EBITDA, which will be reduced to c.5.5x after £4m of synergies expected to achieve by FY2019 (majority realised in FY2018). Return on Invested Capital (ROIC) is expected to exceed 18% in third full year. Charles Wells has generated revenues of £92m, EBITDA of £6m, operating EBIT of £5m and net tangible assets of £36m for the year ended 30 September 2016. On top of the cost synergies, expanded brand portfolio will increase its ale market share from 11% to 16% and further strengthen its presence, with opportunity to step into Scotland market. Post the period, for the 30 weeks, operating marging has been flat year-on-year with like-for-like remain positive across all divisions with Destination and Premium +1.6%, Taverns +1.7% and Leased +2.0%. Volume for own-brewed beer increased by +2%. Looking ahead, the Group said it remain confident to deliver its full year target and is on track to open 20 pub-restaurants, 3 premium bars and 8 lodges in FY2017. Although further cost pressure is anticipated (such as energy inflation, National Minimum and Living Wage and Business Rates), the Group said it will actively managing the risk to its margins. We believe Maston's has sufficient momentum to achieve further growth and given its shares currently valued at FY2017E and FY2018E P/E of 9.6x and 9.2x, along with dividend yield of 5.5% and 5.7%, respectively, its progressive dividend policy aiming at a cover of around 2.0x over the medium-term should ensure attractive shareholder return.

[defcon3] 08/6/2017 19:28

I think you've picked well with MARS. Sentiment around the sector is pretty low, and MARS are positioning themselves to really take advantage of this. A great acquisition in Charles Wells - adding some household names to the Marstons stable, as well as the canning line too. In my opinion, a good company to hold medium/long term - with the potential to grow, plus the 5% div is useful too. Don't forget the shareholder discount card to boot!

[hopefuldave] 08/6/2017 19:15

Thank you both. I'll check that site out. Just out of interest, how many stocks should be in a portfoilo.?

[spacecake] 08/6/2017 17:22

A good spread of companies, different sectors etc. Take a look at Fundsmith website, some good common sense articles there which might be useful.

[hopefuldave] 08/6/2017 17:12

I appreciate any advice on trying to be patient. It's just a bit scary I guess the first weeks with a new portfolio, even though I did check the companies as best I could.thanks.

[bsharman3] 08/6/2017 16:37

everything will be ok!Don't worry - patience!

[hopefuldave] 08/6/2017 13:26

I'm a new investor in marstons, because I believe in them along with the other 14 companies in my portfolio.all my stocks pay a good dividend, but my only fear is my capital going down.which it is at the moment.should I not worry as in the long term everything will be ok? Thanks for any advise.

[arf dysg] 06/6/2017 14:57

I would hate to think that I had drunk something like that without even noticing.

[defcon3] 06/6/2017 13:07

Well I've got some more at 1.28. Happy with that

[arf dysg] 06/6/2017 11:42

Strewth. Maybe it's time to buy more, not that I'm exactly awash with cash.

[skinny] 06/6/2017 09:29

Looking very oversold.

[santangello] 05/6/2017 16:28

xd weakness ?

[ed 123] 05/6/2017 15:12

Yes and that was at a discount to the then price, but need to allow for ex-dividend. Still, market price is cheaper than the placing price.

I think I see spordadic profit-taking, ahead of Thursday's vote. Maybe more to come and then a reset on Friday?

[redartbmud] 05/6/2017 14:34

Better than the placing price then.

[ed 123] 05/6/2017 14:15

It's under 132p now. Enough of a dip?

[spoole5] 01/6/2017 10:50

Just topped up at 1.3347p. Will add further on dips.

[poolies3] 01/6/2017 10:46

I was in a Marston boozer in Durham last night and it was rammed inside and out and it had been all day according to the staff
Ok for a Wednesday
Cannot understand drift down in share price

[spoole5] 01/6/2017 10:37

I suppose a Corbyn victory will impact negatively on the economy so people have less to spend on going out. Also sterling weakness doesn't help. Fantastic price to top up.

[arf dysg] 01/6/2017 10:30

I'm surprised at the drop today. After the election, there are going to be a lot of people who need to drown their sorrows, so Marston's should do well.

[philanderer] 23/5/2017 10:09

HSBC raises tp to 150p ... retains 'hold'

[illiswilgig] 23/5/2017 09:00

Jeffian,

I understand your logic. I own both MARS and GNK shares.

I think the strategies are different. I do think that MARS should prioritise paying down some of its debt but they seem to be intent upon growing the business instead, particularly through its lodges - pub/restaurant/inns and breweries. I await signs of faster progress - But as you point the growth is sloth-like.

Their brewing strategy is very distinctive. The market for premium ale is growing. That can be seen as a part of a declining beer (mainly lager) market. But I'm not sure that's correct. I don't see that many Stella lager louts converting to cloth caps and whippet drinkers of pedigree or hobgoblin despite the 'Whats the matter Lagerboy, fraid you might taste something' slogan. Craft and premium beers are reaching new customers who can afford to pay premium prices alongside a meal and maybe even a room for the night.

There aren't many traditional mid sized breweries left to acquire and Charles Wells seems to fit well alongside the likes of Ringwood, Wychwood, Jennings and the rest.

It's already in the major retailers so no cannibalisation there.

Marston's gets the contract to supply the Charles Well's pub estate and they have just won the Punch Taverns contract - so presumably a little spare brewery capacity could be put to good use.

That the Charles Wells deal is earnings enhancing from the start is intriguing. Most of MARS profits are from the pubs and this implies that their upmarket breweries can be more profitable than the pubs if they get it right.

So I'm comfortable this is a good deal alongside previous Thwaites, Wychwood, Ringwood, Brakspears and of course Marston, Thompson & Evershed which was bought by Wolverhampton and Dudley in 1999?

But it is small beer at company scale so unlikely to be the thing that gets MARS out of its pedestrian growth quite yet.

Looking at MARS shareprice it is cheaper (just) at a P/E of around 10 compared with GNK 10.4, pays a bigger dividend of 5.3% versus 4.4% and forecast growth in current year is greater 3% versus 1% and in 2018 as well 6% versus 3%. So has GNK's purchase of Spirit reduced it to MARS levels of growth? Or will either MARS or GNK or both beat these figures? I think they are both in a with a chance so will hold both - but will add MARS on a fresh low,

cheers

[lord gnome] 20/5/2017 18:58

A 'Buy' verdict from Investors Chronicle online version yesterday. No doubt it will appear in next week's print version. I don't expect it to produce any fireworks, but it's nice to have them on our side.

[lord gnome] 19/5/2017 17:46

Marstons has done a super deal here and once the placing has cleared the shares will move ahead strongly. Management had clearly done its homework and the combination of cost savings, extra turnover and geographical spread, the larger brewing capacity and the canning line all add up. Not quite transformational, but a very good deal indeed. Very happy to hold, even if my addition yesterday could have been better timed.

[speedsgh] 19/5/2017 16:32

On debt/leverage...

[CEO Ralph Findlay]: "On the leverage point, we have consistently said for a number of years that it was our objective to reduce leverage over time. We did not set a debt reduction target, but we said we would reduce leverage over time, and that doesn't change. I think one of the attractions of funding this deal, or combination deals, the way we did was to be able to achieve that without earnings dilution at the same time on issuing equity. That is an attraction. We do acknowledge that there are investors in the market who say your leverage looks high. Not everybody does, but there are some who do. This is one way to say yes, we can hear what you say. We're listening to that point. We can do this and reduce leverage."

[CFO Andrew Andrea]: "Yes. And just to remind you all, we are more focused on fixed charge cover improving than leverage reducing because lease accounting is coming around the corner and pubs -- pub groups with a very high leasehold mix, I think you'll see that playing field leveled somewhat. We are still 95% freehold."