Shares in beer brewer and pubs operator Marston’s (MARS) sank 10% to 109.55p after the company downgraded expectations for full year profits. The company is now guiding for underlying pre-tax profit of £101m for the 12 months to 28 September 2019.

Consensus forecasts had been pitched at around the £103.5m mark.

Profits are likely to stay flat this year too with Marston's losing contribution from disposals, invests in training and ups its digital marketing in order to re-invigorate food revenues.

The pubs operator also plans to accelerate disposals of poorer performing outlets to reduce debts more aggressively.

Net debt last year was reported at just shy of £1.4bn.

FORECASTS CUT

Analysts at Numis have reduced their pre-tax profit estimate for the current year to end September 2020 by 10% to £100.9m.

Chief executive Ralph Findlay said, ‘our drinks businesses have performed well, achieving further growth against an exceptionally strong 2018.  Wet-led pubs have led the charge continuing their positive trajectory and food pubs have achieved modest sales growth.’

WAGE PRESSURE

Increased wage pressure in the destinations division as well as flat like-for-like revenues will result in margin contraction, given the high operational gearing with a higher proportion of fixed costs.

Taverns saw good sales progress with like-for-like up 1.9% and an impressive last 10 weeks which saw a 5.4% increase.

The beer company continued to perform well with volumes up 1%.

The company is now targeting an increase in disposals from £40m to £70m for the current financial year.

The shares have had a good run following takeover of pubs peer  Greene King (GNK) given the company’s largely freehold estate, but today’s update is a reminder of the challenges over the short-term.

Longer-term the group aims to reduce gearing and produce steady cash flows to invest in the estate to keep it competitive, while paying an attractive dividend.

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Issue Date: 15 Oct 2019