Marston's Share Discussion Threads

[mr_spock] 05/11/2019 16:06

The sold-off pubs cannot have been of that high a quality if, as per the RNS,
"The disposal will result in average profit per pub in the retained estate increasing by around 7%"

[our haven] 05/11/2019 15:47

Fenners66 One of my better buys I have to say. For me large holding in Fenner which I was happy/sad that they got bought out. I have to agree though that I can see that last slide too.

[fenners66] 05/11/2019 10:32

So they lose £17.7m + fees and the contribution from these businesses

Also presumably they lose some economies of scale, what % of beer sales do they account for ?
Means deliveries to nearby locations will now be more expensive etc....

It looks like you can get to somewhere like £20m lost vs some interest gained.
Any redundancies to come?
Cost savings as less pubs to manage needs less middle management ?

Factor it all in and then they can state that given eps slide its prudent to reduce dividend and help pay off debt....

[spacecake] 04/11/2019 19:06

Another stupid question: I wonder if Marstons have entered into a supply contract with the new owners and would this account for the 30% off on the asset sale ?

[pherrom] 04/11/2019 17:24

The book value of £62.6m seems very high: a yield of 5.9% (EBITA 7.6%)
The sale value of £44.9m is more realistic: a yield of 8.2% (EBITA 10.6%)

I would say that MARS got a reasonably good deal for what are probably secondary positions; but the book value seems way out.

Which of course still leaves jeffian with his huge '?'

[jeffian] 04/11/2019 16:00

I used to be the Property Director of a brewery fwiw (admittedly a long time ago!). Whilst a formal external property valuation may not be carried out annually, for the purpose of justifying the Balance Sheet at each reporting period, the in-house team would constantly review valuations and adjust as necessary. In between full external valuations, discussions would be held with the external valuers from time to time and small parcels of pubs may be valued as a cross-check. This from Marstons 2018 report & Accounts -

"Properties are revalued by qualifed valuers on a sufficiently regular basis using open market value so that the carrying value of an asset does not differ signifcantly from its fair value at the balance sheet date. Substantially all of the Group’s properties have been externally valued in accordance with the Royal Institution of Chartered Surveyors’ Red Book. These valuations are performed directly by reference to observable prices in an active market or recent market transactions on arm’s length terms. Internal valuations are performed on the same basis.
The estate is reviewed for indication of impairment at each reporting date, using a process focusing on areas of risk and business performance throughout the portfolio to identify any exposure.
Impairment losses are charged to the revaluation reserve to the extent that a previous gain has been recorded, and thereafter to the income statement. Surpluses on revaluation are recognised in the revaluation reserve, except to the extent that they reverse previously charged impairment losses, in which case the reversal is recorded in the income statement."

For Langtons to say the properties are "not typical of the group’s estate and the valuation cannot be carried across to other units" is nonsensical. It raises a huge question mark in my mind.

[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