- Like-for-like sales up 6.8% in last eight weeks
- Firm is mitigating inflationary pressures
- Positioned for changing consumer behaviour
Pubs group Marston’s (MARS:AIM) returned to profit in the 12 months to the start of October, generating underlying pre-tax profit of £27.7 million after revenues almost doubled to £799.6 million. Investors welcomed the return to form with the shares gaining 0.8% to 39p.
Full year like-for-like sales were back to 99% of their pre-Covid levels despite a disrupted 2021 Christmas period, and encouragingly in the last eight weeks they were up 6.8% year-on-year.
Two World Cup football matches featuring England pushed like-for-like drinks sales up around 50% compared to 2021 and bookings for Christmas are higher than 2019, although the company said ‘walk-ins’ typically account for a ‘significant’ proportion of sales over the festive season.
Looking forward, the company said it was managing the inflationary challenges within its control and offsetting higher costs through ‘efficiencies’ and ‘pricing strategies’.
Chief executive Andrew Andrea commented: ‘Current trading to the end of November has been positive with encouraging levels of Christmas bookings as we look forward to the first restriction-free festive period in three years.
‘Demand for our predominantly community-based pubs continues to be encouraging despite ongoing macro uncertainty, and our estate is well-placed to benefit from changing patterns in consumer behaviour.
‘We are managing cost inflation well and remain confident that our commitment to continue to reduce the group's debt and return sales to back to £1 billion will drive NAV (net asset value) and shareholder value.
HEDGING IN PLACE
The group’s gas price is fixed until the end of March 2025, while electricity is hedged for the first half of fiscal 2023. More than half of food and drink prices have been locked in beyond 2023.
The government’s increase in the national minimum wage which comes into force in April is anticipated to cost around £2 million in 2023, with the company seeking to mitigate most of the increase through price rises.
The firm made progress against its target to reduce net debt below £1 billion with net debt falling by £16 million to £1.22 billion.
A write-back of freehold impairment charges and gains made on interest rate hedges resulted in net asset value per share increasing to 102p from 64p.
WHAT DO THE EXPERTS SAY?
AJ Bell investment director Russ Mould commented: ‘Shareholders have a return to profit to toast at Marston’s but the pub chain still faces several challenges as it looks to end 2022 on a high note.
‘Not least the potential impact of further rail strikes which could lead to cancellations for Christmas parties and people socialising at home rather than struggling with a transport conundrum.
On a more positive note, Mould added, ‘Marston’s has done as good a job defending itself from inflationary pressures as Messrs Maguire and Stones will look to withhold jet-heeled French striker Mbappe this weekend and longer term the company remains markedly confident in its plan to reduce its borrowings and get sales up to £1 billion.’
Disclaimer: Financial services company AJ Bell mentioned in this article owns Shares magazine. The writer (Martin Gamble) and editor of the article (Ian Conway) own shares in AJ Bell.
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