Marston's Share Discussion Threads

[janekane] 02/10/2018 20:35

For gods sake tell him he's been banging on about this for a long time
Give him the info

[illiswilgig] 02/10/2018 17:51

QP - 994

Good point QP on banking covenants.

As it happens I do know some of the covenants and how much headroom there was in 2017 (not a lot in some cases - but then how volatile is the EBITDA?).

Thanks for bringing it up,

cheers

Illis

[spacecake] 02/10/2018 17:38

banking covenants, would that info be in the debt propectus assuming they went to the market for the money or could it be found at companies house ?

[janekane] 02/10/2018 02:52

Saying that I doubt RF would give out price sensitive information to you or any one else for that matter

[janekane] 01/10/2018 19:18

Ask them at the next meeting

[quepassa] 01/10/2018 14:40

Marston's have an enormous debt pile and yet no-one seems to know what their Banking Covenants are. (eg Gearing, LTV's, minimum PBT, interest cover etc etc etc)

not really very satisfactory.

their debt is a concern for any investor but just how much headroom do they have against Banking Covenants?

no-one seems to know.

funny old world innit.


ALL IMO. DYOR.
QP

[mister md] 30/9/2018 19:39

good post #986
I will stick with it, but these days make sure no individual share is not a too large % of the portfolio ... that way the impact is not too great if it does go wrong

[janekane] 30/9/2018 19:38

rights offerings are unpopular
companies typically choose them as a last resort
This share price will be the norm for the next decade until the board change direction

Selling beds is the answer get shot of some of the older brewery sites (planning for industry ,housing ,and lodges )transfer brewery production to the more efficient ones
Get rid of all the least profitable pubs again for residential use
All the other major Brewers in the uk farm out delivery thus cutting high costs
Freeze divi,s

[janekane] 30/9/2018 19:25

rights offerings are unpopular companies typically choose them as a last resort
This share price will be the norm for the next decade until the board change direction

before the thick n smelly hits the fan

[janekane] 30/9/2018 19:11

986
Good responce thanks very informative

[jeffian] 29/9/2018 12:34

Good post, illiswilgig. More politely put than I would.

[quepassa] 29/9/2018 11:38

of course there is another way of achieving any given growth/investment strategy and paying down debt.

...it's called a Rights Issue.


ALL IMO. DYOR.
QP

[chinese investor] 29/9/2018 11:31

Cost of Annual Dividend is £44 million - eliminating that is hardly going to make impact into reducing the debt.

[illiswilgig] 29/9/2018 11:18

Janekane,

I think you put the dilemma well. High yield shares are often popular for supplementing income. I sometimes do the same, though I am not supplementing a pension. Not yet. Though my investing income is my main income.

But there is no such thing as a free lunch and the high yield comes at a price.

Normally the price to be paid is that much of the company profits (perhaps too much) are paid out in dividends and little is retained within the business to invest or pay down debts.

Sometimes the high dividend yield occurs because fear in the stock market has overcome greed and suppressed the share price causing the dividend to rise.

Effectively the market is betting upon the future cashflow from the business being lower than expected by the Board and eventually a dividend cut will follow.

Just occasionally the market bets wrong and the future cashflow is sustained and the shareprice rises once greed overcomes fear.

Marstons seems to be a classic case.

Will greed or fear be the winner? At the moment it's fear. But we don't yet know which way it will play out.

The signs are not good. The market is in decline. Costs are rising. Lots of competition. Economic clouds on the horizon......plenty of reasons to be fearful.

The market would probably be less fearful if the debts were not so high.

Of course Marston's could change strategy. Stop investing in its pub estate (though tatty pubs soon lead to declining sales), flog off a few each year to reduce debts (though they do that already but they could increase it) and perhaps most importantly cut the dividend to pay down debts.

But how much would they need to reduce the debt to change the fear in the market? And how long would this take? IF they cut the divident entirely after a few years the debt pile will start to reduce significantly. But what would happen to the share price in the meantime? and will just reducing the dividend a bit lead to a significant reduction in debt anytime soon?

The Board strategy is very clearly stated as the opposite. To invest in their pub estate, building new ones (with rooms) in locations that make a higher margin and selling off old ones in the wrong places. This strategy needs increasing revenue to more than compensate for the increasing costs and results in lower leverage as the revenue and profits climb. (I may have oversimplified the company strategy in the interests of keeping this short).

So what to do?

Essentially it comes down to whether my greed (for the income) overcomes my fear (informed by my knowledge, experience and research) for the future of the business.

It's never easy to be greedy when others are fearful, or to be fearful when others are greedy (amended from Warren Buffett). Nor is it likely to be right most of the time to go against the market - as so often cheap shares are cheap for a good reason.

It's my choice whether I invest in this company, knowing the strategy and even though there are difficult economic conditions on the horizon.

If I don't agree with the strategy, or don't think it will work - then probably I should be looking for another investment. One that doesn't disturb my sleep at night. If, of course, you can find one that pays you the income you need? The renewable energy investment funds are proving popular in this regard at the moment (UKW, JLEN, TRIG, FSFL etc) but then - will the wind blow tomorrow and the sun shine? Questions, questions....and so little sleep :-)

Good luck,

cheers

[janekane] 28/9/2018 11:48

I'm also long but my main concern is that becouse of high debt the divi will be cut
My partner and I both rely on divi,s as a bolster to our pension funds
I still maintain that this gearing is way to high for a company in this sector
Just look at the problems "punch ,enterprise,and various other pub companies had with high gearing
Thier assumption is that for the next 35 to 40 years will be all good trading to service this debt
Just look back in time to see the problems debt has on companies going forward

[quepassa] 28/9/2018 11:47

Year-end trading statement 10 October 2018
2018 Preliminary results 21 November 2018
2019 Interim results 15 May 2019
2019 Preliminary results 28 November 2019




QP

[cc2014] 28/9/2018 11:20

You can't seriously be telling me Jane that you are using ADVFN data to inform your investment decisions? They pay for this data of course but it is inconsistent from year to year and is sometimes just plain wrong.

Most of the free websites that provide this data suffer from the same flaws. Even Hargreaves Lansdown website which sources it's data in the same way as ADVFN is riddled with mistakes.


I have found the only way to be sure of my data is to read the accounts. It's hard work but I know the data will be correct. It also paints a picture that a set of numbers on their own can't.


In terms of the gearing here, MARS have mitigated the interest rate risk by the use of swamps. On half their debt through the swaps/securitised debt the interest rate is fixed. Interest rates could go to 15% and the interest won't rise on the element subject to the swamps.

Further, I would argue that interest rates are only going to go up if the economy is doing well. Rising interest rates are an outcome of an improving economy and therefore our consumer will be spending more, thus like for like sales and margins will be rising which will more than cover the unhedged interest.

The thing to recognise about gearing is that in an improving economy it's a good thing not a bad thing as long as it's managed properly.


Stocks go up, stocks go down and you take your chance. I'm very comfortable with being long here.

[rcturner2] 28/9/2018 11:07

Jane, you cannot rely on the advfn figures, they are quite often way out.

[janekane] 28/9/2018 11:06

Sorry Jeff why do u concider advfn as an unidentifiable site
It's the same one you use

[janekane] 28/9/2018 10:59

Jef go to Mars here on advfn then go to the top of your screen you will see financials
Click on this you will get today's financial details
The gearing at Mars is 68.91 % this is high and conciderably dangerous A gearing ratio higher than 50% is typically considered highly levered or geared. As a result, the company would be at greater financial risk, because during times of lower profits and higher interest rates, the company would be more susceptible to loan default and bankruptcy.
A gearing ratio lower than 25% is typically considered low-risk by both investors and lenders.
A gearing ratio between 25% and 50% is typically considered optimal or normal for well-established companies.


Read more: What is a good or bad gearing ratio? | Investopedia

[jeffian] 28/9/2018 10:32

jk,

Yours is a synopsis from from some unidentified website; mine is from the last published accounts. I'll leave it there and let others decide which they wish to use. Frankly, my dear, I don't give a damn.

[quepassa] 28/9/2018 09:46

she doesn't comprehend what Banking Covenants are.


THESE ARE RATIOS

[janekane] 28/9/2018 09:39

Net Debt 1,889.40 m
Gross Gearing 68.91 %
Quick Assets 286.30 m
Net Working Capital -113.90 m
Intangibles / Fixed Assets 11.16 %
Turnover PS 156.53 p
Pre-Tax Profit PS 15.82 p
Retained Profit PS 6.41 p
Cash PS 27.55 p
Net Cash PS -41.93 p
Net Tangible Asset Value PS * 99.94 p
Net Asset Value PS 146.94 p
Spread 0.20 (0.20%)
* Calculation based on Ordinary Capital figure as contained in last annual report, and the most recent shares in issue figure. Therefore the ratio might be exposed to inaccuracies.
Marstons Balance Sheet
LSE:MARS:Liabilities+EQLSE:MARS:Assets
For Sector Balance Sheet comparisons Click here

Share Price Performance
Sample Period † High Low
1 week 102.00 97.80
4 weeks 102.60 89.20
12 weeks 103.20

[jeffian] 28/9/2018 08:50

8 NET DEBT









31 March

2018

Cash flow

Non-cash

movements

and deferred

issue costs





30 September

2017

Analysis of net debt



£m

£m

£m

£m

Cash and cash equivalents











Cash at bank and in hand



42.8

(11.8)

-

54.6





42.8

(11.8)

-

54.6

Financial assets











Other cash deposits



120.0

-

-

120.0





120.0

-

-

120.0

Debt due within one year











Unsecured bank borrowings



(24.3)

(25.0)

-

0.7

Securitised debt



(30.3)

14.7

(15.5)

(29.5)

Finance leases



(0.2)

0.1

(0.1)

(0.2)

Other lease related borrowings



0.3

-

0.1

0.2

Other borrowings



(120.0)

-

-

(120.0)





(174.5)

(10.2)

(15.5)

(148.8)

Debt due after one year











Unsecured bank borrowings



(286.4)

(9.0)

0.3

(277.7)

Securitised debt



(761.1)

-

15.2

(776.3)

Finance leases



(27.5)

-

0.1

(27.6)

Other lease related borrowings



(306.6)

(35.8)

2.4

(273.2)

Preference shares



(0.1)

-

-

(0.1)





(1,381.7)

(44.8)

18.0

(1,354.9)

Net debt



(1,393.4)

(66.8)

2.5

(1,329.1)

[jeffian] 28/9/2018 08:45

jk,

You seem to have taken that from some website, not the report and accounts of the company, which is the only audited and verifiable source. Can you explain how they got to £1,889.4m?