Pubs, lodging and brewing group Marston’s Plc (MARS), delivered a solid set of first half results, reporting pre-tax profit up 2% to £37m. A confident looking outlook statement and reiteration of achieving full year earnings expectations have helped push the shares up 4% to a new 12-month high of 105p.
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Marston’s has continued to strengthen its market-leading position in the UK beer market, with a 14% share of the ale segment, 22% of the premium ale market in on-trade and 28% of the premium off-trade market.
Over the last 10 years the company has seen a four-fold increase in revenues and profits against the backdrop of a declining beer market. The company seems well positioned to tap in to leading trends such as a wider choice of beers with local provenance and taste including craft and world beers. This was borne out in today’s results, with operating profits growing strongly, up 8.2% to £14.5m.
Destination and Premium pub-restaurants increased revenues by 2.4% to £215.7m, reflecting 1.2% like-for-like growth, while Taverns saw revenues up 4% to £154.2m, and 3.9% like-for-like growth. Operating margins were in line with the prior year.
FOCUS ON CAPITAL EFFICIENCY
Commenting on the strategic objectives, chief executive Ralph Findley says: ‘We remain focused on our strategic objectives and good progress has been made on our stated aim to improve cash generation and reduce the group’s leverage.’
Cash flow from operations rose by 6% to £66.8m, higher than the 2.4% increase in reported operating profit, reinforcing the underlying improvement in cash generation and cost discipline.
Capital expenditure was £74.4m in the period, around £9m below last year, and the company expects full year expenditure to be £130m including £50m on new-build sites.
This represents a £33m reduction compared with the prior year, and the company expects to reduce net capital expenditure by a further £25-30m in 2020.
Management is targeting £129m of disposals in the 2020-2023 period, which will be a big help in reducing group leverage.
Meanwhile the board declared an interim dividend of 2.7p per share and signalled its intention to hold the dividend at current levels while it reduces its debt load.
