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JP -Announced the Fed is likely to start reducing rates in the new year and is done with any lifting for this year. Dow has bounced back, and the Indian Market overnight has started moving over a 70,000 level higher.
If the BOE and the ECB signify a similar trend in reduced inflation we can see loan rates reducing which will benefit firms such as Marston not only with reducing financial loan costs, but also with increasing property values where the Estate is already worth over £2b on the books or twice that of high loan rates. So a lot to look forward to in 2024 with not only increased Sales projections but also reduced loan rates. Something that many have criticised in the past. GLA.
Annual results from Marston's (MARS) were released less than three weeks after the pub operator confirmed that chief executive Andrew Andrea would stand down with immediate effect. Justin Platt, the former Merlin Entertainments chief strategy officer who will take the reins in January, has a significant task on his hands to rejuvenate the share price, which is stuck far below pre-pandemic levels.
Like-for-like (LFL) sales rose 10.1 per cent against last year, with food and drink spend rising by 8.1 per cent and 8.6 per cent respectively. Momentum slowed after the year-end, with LFL sales up 7.4 per cent, although management flagged that Christmas bookings are ahead of last year.
Elsewhere, income from the company's joint venture with Carlsberg (DK:CARL.B) tripled to £9.9mn.
Despite revenue growth getting the company closer to returning to £1bn in annual sales, it fell into the red as £21.6mn of losses on interest rate swap movements and £31.2mn of property impairment charges dragged it down.
Looking ahead to the medium term, management is targeting a 200 basis point uplift in margin. The underlying profit margin was flat in the year at 14.3 per cent, on increased operating profits of £125mn.
Analysts at Peel Hunt argued that the 9.8 per cent increase in the national living wage, which is coming in April, "should be mitigated by adjusting prices from one of the lowest price points in the sector and the acceleration of the cost efficiency programme".
The valuation is cheap, with the shares trading hands at just four times forward consensus earnings. But as we have noted before, the hefty discount to net asset value could also highlight justified market disinterest. Hold.
Last IC view: Hold, 35p, 16 May 2023
For FY2024, if the company can keep the margin of 2023H2 and no more one-off items like the "the final settlement following a transitional services agreement with CMBC", we can expect a decent Cash In-flow of £40m to £50m, but the market capitalisation is only £189m, so means the company can earn that money in less than 4 years. Don't forget the net value of pub properties is over £600m ( after loan). You are basically buying the pub properties at less than 1/3 of their net worth plus the pubs will make enough money to buy you another Marstons. Unbelievable bargain!
Now we have the annual result, we know what happened to the £24m (i.e. £55m-£31m): it was mainly used to pay suppliers, so you can see from the Balance Sheet that "Trade and other payables" reduced to £170.4m from £204.4m. From the notes, I guess this might be "the final settlement following a transitional services agreement with CMBC".
A £35m profit before tax but for the past 2-3years the same old doomsters visit this site with no faith. They hope to wait on the fence for an offer to come in before they buy, but let's be honest Mr Cuprinol will not be quick enough to get back in should a sudden offer come in, but why would Marstons want it to happen? They are not bothered about the company debt which is reducing with improving sales, and margins. They are gearing towards £1 Billion in sales where debt is reducing (which will be far cheaper once interest rates fall and debt can be re-negotiated to bring savings. Prop, values also now increasing will accelerate on cheaper loans too. Millions are currently being spent on Electric charging points being installed in their car parks. If they were that worried short term they would not spend this money which they do for the longer term as it gives them advantages over competitors. See below what they released in their precis table :-
IMPROVED UNDERLYING PROFITABILITY, POSITIVE CASH FLOW AND CONTINUED STRATEGIC
MOMENTUM
Marston’s, a leading UK operator of 1,414 pubs, today announces its Preliminary Results for the 52 weeks ended
30 September 2023. The period under review commenced on 2 October 2022.
Underlying Total
2023 2022 2023 2022
Total revenue £872.3 m £799.6 m £872.3 m £799.6 m
Pub operating profit £124.8 m £115.4 m £90.2 m £142.1 m
Share of associate £9.9 m £3.3 m £9.9 m £3.3 m
Profit/(loss) before tax £35.5 m £27.7 m £(20.7) m* £163.4 m
Net profit/(loss) £32.0 m £27.5 m £(9.3) m £137.2 m
Earnings/(loss) per share 5.1 p 4.3 p (1.5)p 21.7p
Net cash inflow £34.4 m £26.2 m £34.4 m £26.2 m
NAV per share £1.01 £1.02
Underlying operating margin 14.3% 14.4%
*Includes a £21.6 million net loss in respect of interest rate swap movements, a partial reversal of the £109.2 million net gain reported in FY2022, and
£31.2 million of charges in respect of the impairment of freehold and leasehold properties.
Barchid yes it was Platinum on the majority of info, but Vanguard now appear. I am not sure if the 2 are connected or whether there were 2 separate offers
I only mentioned this take over as its in the same brewing,pub,club restaurant sector as marstons and at the time of the deal greene king had a 1.5 billion £ debt,but as you say,the share holders did get to vote,if i remember it was just before or during the first covid lockdown,
FD
Vanguard ?
I remember Platinum, were they tied up with Vanguard ?
Also remember the Vanguard group offer of over £1/share, in early 2021 and we were not informed until after the event.
Remember in 2019 when CK assets, a Hong Kong based property developer took over greene king,who saw that coming ?
Barchid, Absolutely correct, as stated with the SP at these levels a Rights would be virtually impossible.
It does amaze me at these levels some Private Equity has not come in and literally stripped the company. My conclusion, the JV with Carlsberg is so rigid there is no latitude for capitalists to extract profit.
The company have been offering 30% discounts on meal for a few weeks now, probably to bolster Pre-Christmas income.
It remains to be seen if Justin will have some magic touch??
Euse/FD
Your points are well made, but am I right in thinking that even a 1 for 1 at 30p (ouch !) would raise just under £190mill ?
With their debt standing where it is currently that would make a difference to their balance sheet of only a little more than "nothing to a jam tart" if I'm right.
Please correct me if my maths are wrong but I'm working that on the FT's figures which show shares outstanding as 634mill.
No wonder the SP is effectively just option money.
Another private equity deal today taking yet another listed stock off the London market but no PE investor seems to have checked Wolverhampton on google maps for a long time.
It's a catch 22". They can only sell so many Pubs otherwise be in breach of the JV with Carlsberg. Sellins Pubs may release capital to be taken by Funders, but then income will decrease, making it harder, if not impossible, to achieve Sales target of £1b.
A rights issue could be the solution, however at current SP levels difficult to get away. MARS should have conducted a funding issue 3 years ago when both M&B and Whitbread did so. That was a time when funds for the Hospitality sector was comparatively easy against today
Roll on the rights issue! It’s the only way out of the debt trap without selling lots of pubs
I am not in the same league as many commentators on here but I do have the advantage of age: I have commented previously on here about the effect of inflation on debt and how inflation erodes debt. I lived through 25% inflation in the 1970's, and saw how a house would be sold for the same nominal value as a year previously, but in reality was 25% cheaper.
First, this company is not trading at a loss and there is no reason why it should not continue to increase sales short of another epidemic or everyone suddenly becoming teetotal. Therefore the key financial points are revenue, debt and net assets. On net assets this company is worth three times more than the shares are presently worth, and my reckoning is that the valuation of the estate is probably an underestimate. Pubs tend to be large buildings and with large car parks, and while I personally hate to see a watering hole closed and its premises converted to flats and development, as an investor this is a reassuring thing. A share worth less than 1/3rd of a companies asset is a no brainer to hold.
On debt, the high inflation rate of 10% in the last year has seen this eroded in real terms by some 10%. The repayment of loans seems low, at about 30 million, but inflation has seen it eroded by far more.
Take the 22 and 23 figures. 2022 Debt 1560 million, 2023 debt 1529 million. Revenue 2022 799 million 2023 872 million.
The ratio of debt to revenue for 2022 is 1.95. In 2023 the figure is 1.75, with only a token reduction in actual debt. This is against a background of an increasing financial squeeze on Consumers.
Like many I cannot understand why this share price is fatally wounded by good news, but despite my age I really do understand that long term means long term. My timing for my initial tranche was perfect - about a month before the first lockdown. I am not an idiot but I am happy to act as a consultant in share recommendations: Whenever I buy a share, despite my research, the price falls out of the sky. Marston's may well be better managed than it is now, but I am prepared to wait.
Agreed very cheap!
Any re-funding will be at the behest of existing Banks who already have the company on monthly watch following breaches of covenants.
It is to be hoped Justin Platt will instill a new direction, something I put forward 3 years ago
Lejib
Precisely !
Funny thing was that it took our midnight rambler till almot 04.00 to think that one up, perhaps his mind was slower as a result of the extended slurping time ?
I believe the reason for the artificially deflated share price is the anticipation of debt refinancing in the city, which, reading between the lines, seems necessary by 2024 Q2. Once the refinance occurs, I expect the share price to significantly increase.
The board have possibly also recognised the need to change direction, hence the new CEO appointment. So, remain optimistic and consider buying now – as the saying goes, "be greedy when others are fearful."
"Just read the official releases and ignore anything else. "
Yes, like the share price.
So we have most Stock Brokers and Analysts now saying Buy. The Company accountants suggest the NPV for this share is worth over £1 with prop values in excess of 2 billion twice that of debt and the share is currently on the market for 29.75p, a bargain. The shorters will want this even cheaper hence negativity. Do not sell your shares and this share will recover very quickly. Christmas is already booking up on last year. Just read the official releases and ignore anything else. IMHO, DYOR, GLA.
Are Investors to ignore the £24.5m valaution impairment highlighted by Christies who have conducted on site valuations in July? Christies are now commisioned to value 1/3 of the estate each year on a 3 year rolling basis. These valuations are correcting the inhouse desk top values previously in place during and shortly after Ralph Findlay's term in office. True values are now being undertaken, or are they to be dismissed in favour of the Accountants you favour?
No doubt the values were better in 2013!!!!
I see this share as another buying opportunity going forward where the NPV per share is over a pound from qualified accountants and auditors where the chairman has said we will expect a re-rating on property values in the new year.
If the Company is expecting growth and is producing large amounts of free cash from now through 2014 then we cannot expect the values to suffer. A great opportunity in my opinion.
Anyone who doesn't even know what decade they are living in must have serious issues, especially when they lecture everyone else with their "knowledge".
Is this "he's behind you" joke that you re rehearsing for the innumerate at your'e Pantomime?