- Full-year operating profit up 18%
- Material net debt reduction
- Positive trading continues
Investors raised a glass to Marston’s (MARS) on Tuesday, pushing the shares up 3.3p or nearly 9% after the pubs group served up a big jump in full-year profit and said positive momentum has continued with Christmas bookings tracking ahead of the prior year.
The shares are up around 40% over the last year, comfortably outperforming peers whose shares are down between 6% and 10% over the same period.
WHAT DID THE COMPANY SAY?
CEO Justine Platt commented: ‘2024 has been a defining year for Marston’s as we began an exciting new chapter as a leading pure-play hospitality business.
‘The sale of our stake in CMBC (Carlsberg Marston’s Brewing Company) has been transformational, enabling us to significantly reduce debt, increase our flexibility and focus on what we do best: running great local pubs.
‘We’ve delivered like-for-like sales growth ahead of the market, significant margin improvements and robust cash flow, while current trading is encouraging with Christmas bookings already ahead of last year.’
STRONG PERFORMANCE
Marston’s continues to outpace the broader market with like-for-like sales up 4.8% driving revenue 3% higher to £898.6 million over the 52 weeks to 28 September 2024.
Underlying operating profit improved by 17.9% to £147.2 million reflecting revenue gains, and a 2% expansion of the operating margin to 16.4% driven by efficiencies.
Strong trading contributed to a 47% increase in operating cash flow to £207.4 million, and together with the proceeds from the sale of the brewing division and disposals from non-core properties allowed the company to materially reduce net debt excluding leases by £301.7 million to £883.7 million.
Looking ahead, the company noted a ‘strong’ start to the new financial year with like-for-like sales growing by 3.9% over the first six weeks, while Christmas bookings are tracking ahead of the prior year with many venues securing ‘high levels’ of reservations.
Despite additional costs from the Autumn budget, the company believes the whole package of measures is manageable in the context of its strategic goals.
Over the near to medium term the company is targeting revenue growth ahead of the market, margin expansion of a further 2% to 3%, over £50 million of annual recurring cash flow and more than 30% return on invested capital.
EXPERT VIEWS
Commenting on the targets, Shore Capital analyst Greg Johnson said he believes they are ‘ambitious but supported by improved cash flow, which if successfully executed could see earnings double over the medium term.’
Dan Coatsworth, investment analyst at AJ Bell, commented: ‘While the full-year results showed profit and revenue gains with improved margins, the company has signalled a path to substantially increased cash flow.
‘The company has benefited from having a bias towards boozers which are community-centred and located in suburban and rural areas rather than city centres. This chimes well with socialising trends in the wake of the pandemic.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
