Shares in pub group Marston’s (MARS) gained 3.4% to 86.4p on Wednesday after reporting a better than expected recovery in trading since reopening.
Despite social restrictions limiting the number of customers when pubs could open indoors from 17 May, overall sales performance has been better than management’s internal expectations.
The key drivers have been additional food covers, warmer weather, investment in outdoor trading areas - 70% of its pubs have outdoor seating - and the delayed Euro 2020 football tournament.
Like-for-like sales across food and drinks, excluding the carvery sites which are around 20% of food sales, bounced back to within 8% of pre-pandemic levels from 17 May to 24 July.
The carvery businesses faced tougher conditions due to the predominantly self-service nature of sites but like-for-like sales still reached 73% of 2019 levels after 12 April.
IMPROVING PROFITABILITY
Since restrictions were removed on 19 July, the company said it had seen a ‘modest’ uplift in sales, which while encouraging was too early to extrapolate into any meaning full trends.
Accommodation sales were said to have been ‘excellent’ and benefited from international travel restrictions and the associated uptake of staycations. Leisure guru Greg Johnson at Shore Capital said his read was that the company achieved double-digit growth.
The company generated positive earnings and cash flow during May and June despite operating at around 70% of capacity.
Johnson reckons that the combination of increased covers and lower promotional activity should be beneficial for margins.
Looking further out Johnson’s base case is for the business to make a full recovery in profits by fiscal 2024, forecasting EBITDA (earnings before interest, taxes, depreciation, and amortisation) of around £185 million.
‘Stripping out the group’s 40% stake in the Carlsberg joint venture, the pub estate is valued at just eight times fully recovered EBITDA’ said Johnson, adding that this is sharply below the historic trading range.
