- Like-for-like sales up 7.3%
- Cash generation cuts net debt
- Sales growth continues in 2H
Pubs group Marston’s (MARS) revealed continued outperformance of the wider market with like-for-like sales up 7.3% in the first half and underlying pub operating profit 22% higher at £52.7 million.
The shares have performed strongly over the last week ahead of the results, inviting some profit taking today with a fall of 4% to 32.1p, but that still leaves them around 13% higher over the period.
DEMAND REMAINS RESILIENT
Revenue for the 26 weeks to the end of March increased by 5.2% to £428 million with good momentum seen across food and drink sales while continued progress on cost efficiency saw a 1.7% improvement in the underlying operating margin to 12.3%.
The business appears to be benefiting from the positioning of its estate with over 90% of pubs situated within local communities and surrounding suburbs.
Cash generation was strong, with operating cashflow up 30% to £90.9 million. After deducting interest and capital expenditures and receiving £9.6 million in disposal proceeds, net cash flow in the half increased to £30.5 million from £11.5 million in 2023.
This allowed further progress against the company’s debt reduction strategy with net debt falling by £24.5 million to £1.16 billion which is encouraging given the seasonally-weaker first half.
WHAT DID THE CEO SAY?
Chief executive Justin Platt commented: ‘Reflecting on my first few months with Marston's, I am very excited by the potential that lies ahead. The UK pub market offers significant value-driving opportunities for those who can engage and deliver for their guests.
‘With our high-quality estate and guest-obsessed team we are well-placed to capitalise and deliver consistent, reliable cashflows that will drive value for our shareholders.’
Momentum has continued into the second half with like-for-like sales excluding the impact of the additional May bank holiday in 2023 up 5.3% over the last six weeks.
Platt told Shares the business is well positioned to capitalise on the major sporting events scheduled this summer including the Euro football championships with both England and Scotland in action.
Shore Capital’s Greg Johnson maintained his 2024 earnings forecasts but conceded there was scope for upgrades. ‘Were current trends to continue and the sun to shine, we see scope to nudge our numbers up later in the year’, said Johnson.
Liberum analysts also maintained their full year forecasts, noting: ‘These H1 results put the business on track to meet our FY24E forecasts for operating profit (excluding joint ventures) of £139.2m and pre-tax profit (including joint ventures) of £55.2m with a usual one third, two thirds split between to two halves.’
