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I wish, wholesale margins are wafer thin:)
No, KahunaJim's oufit takes most of it along with the shops apparently. Marston's should put their factory price up.
Thank you, Kahuna Jim for your informative post. I do hope that some Supermarket supply business is profitable. I have noticed Marstons brands well represented in Morrisons, Aldi and Lidl, and hope there is some profit in this.
Enjoying the banter and various views again.
Hoping to add some value, as previously posted, Carlsberg import very little into the UK. Carlsberg Pilsner, Export, San Miguel and Tetley's are all brewed in Northampton across two shifts. (Stopped the 3rd shift a couple of years ago when Tesco demands became to damaging and became more profitable as a result). Working for a major wholesaler I can confirm increasing Beer Off Trade sales YTD of +17% (Marstons +33% Carlsberg +27%) On Trade all on Furlough for 3 months. GLA
fairdealer - Very true, I'd be hopeful the government will maybe come up with a way to cover the losses for inventory I the hospitality sector as one of the schemes to help them out seen as the loss has been caused by their decision to shut down? It's a hopeful thought but that would make a difference especially to small independent organisations in the sector.
Thanks for your insight, have a good weekend. Time for a pedigree or two from the fridge.
rick correct sales were reported up. these are sales through supermarkets etc where margins are paper thin. Of course no mention of the loss in cask sales which is enormous.
At least you have an open mind. Lets hope you are right and I am wrong! Time as always will tell
Apologies, this was what I was referencing " Cash flow supported by very strong off-trade sales - up 55% since half year"
I completely agree, I always enjoy hearing an opposing view to mine as more often then not you can take something constructive away from it.
I believe sales will recover quicker than planned and I hope I'm right but acknowledge I may well be wrong but that is a risk I can afford to take. With 90% of Marston's pubs having outdoor spaces and those that don't being predominantly located as more upmarket inner-city venues I see MARS generating a good amount of sales compared to a lot of the competitors who have a higher indoor-only estate.
Also, if I am not mistaken wasn't it reported in the accounts that wholesale sales were up 55% since the lockdown?
right and no doubt Carlsberg had their eye on that ball too.
Judging by Carlsberg past collabatory agreements, they rarely run to term before they (Carlsberg) effect total control, which is fine providing the consideration is right.
Astute comment, however Carlsberg could possibly find that with a no deal, or limited brexit deal they might produce more of their beer which is currently imported at the JV premises.
It could be a (very) cheap insurance policy for them, does that make sense ?
You may well be correct, but these boards are here so we can understand all sides of a particular story.
At present I am very nervous of companies with high debt levels, especially when they are at fixed rates of interes, as is the case at MARS as I understand it.
I just do not see where their required revenue will come from, a lot of their premises are pretty low grade too...
Have erred on the positive side with profit projections, knowing full well some will react in a disparaging manner. That said we (MARS) have a mountain to climb. Looking through rose-tinted glasses is a tool of trade for Traders.
As indicated I am not happy with not knowing how Carlsberg UK will handle imports from Denmark. The cynic in me says knowing what an astute Company Carlsberg is, it will not be part of the JV structure and yet Carlsberg require direct access to all Marstons Pubs.
Thanks for the insight barchild. I admit my £1 estimate is pure speculation I hope I had made that clear before but if not I will endeavour do so next time. I take the point about spending habits changing in the short-medium term but again it is my speculation that in the long term things will recover. If a vaccine is around next year and all the big sporting events are back up and running we should see a much more positive spending spree in summer 2021?
Rick, he (draft) means me. Like yourself have never shorted in my life indeed believe it should be illegal as in Germany.
Oh wait I see what you mean now draft you were referencing fairdealder. My apologies.
Thanks for that Fairdealer I shall take another look.
A great post re split of profits etc, but I suspect, if anything, that you are rather generous with the nav which I guess is largely supported by the value of their pub estate ?
Given we know their less attractive pubs had a sale 9 or 10 months ago when everything in the pub garden was looking rosey, & were sold at a significant loss to book, then to make matters worse their announced intention to sell Pitcher & Piano chain failed to find a buyer, it is hard to see this estate being worth much, after the debt which is secured on it ?
But protestations by posters that this will be worth £1 (or more) in a year or 2 are pure speculation, just like the suggestion that you are short, quite probably made by someone who is long & wrong !
FWIW my guess is covid has changed public habits, whether pubs will go the way of newsagents remains to be seen but if more drinking is done at home less will be consumed overall, and at a much lower profit margin to the brewer. I think new investors here need to be cautious, not gung ho.
Do you mean I've gone short draft? I've never made a short in my life as I'm a passive LTI. I took time to read Fairdealer's post and tried to offer an alternate opinion, is that not the basis for healthy debate and discussion after all? I've seen fairdealer post on a few other shares and I value their insight.
Rick the NAV is published in the annual accounts, have a read.
The basic point being whatever an individual's take, on stated profits from the Brewery division Marstons lose out and require an increase in profits of the combined operation to the tune of 24% to just standstill.
Marstons will still retain a big debt pile to manage/maintain.
If my words appear pessimistic so be it, but realistic when judged against other Companies within the sector.
It is not a popular proposition here but a Rights Issue would give the company the run way needed.
Wrong again draft. As a Trader would expect that comment from you.
Have been here for 5 years, and with one or 2 others can claim too have a little more knowledge of the Company's affairs than most.
How long have you been here?
quite obvious hes gone short.
I find your post to be a little pessimistic about Marston's future fairdealer. I'm intrigued how you calculated the NAV to be 74p?
IMHO this will be £1 plus come 2-3 years time, the joint venture will be nothing but good news for Marston’s. An additional 34 million will be paid to Marston’s PLC in Q3 2021 when share prices have recovered and Covid-19 is behind us. The JV will IMHO bolster the dividend funds in a few years time and create good value for shareholders.
Slightly off topic but relevant to the SP I believe a vaccine will start to be circulated in Q1/2 2021 around the globe. The world is working on it with unlimited funding and I expect we will hear some very good news by September 2020. I wouldn't be surprised if we see 2-5 successful vaccines being used and circulated in 2021 which will enviably cause another bull-run and the saying "a rising tide raises all boats" will apply here.
In regards to the near term, I'd like to imagine the government will cut the hospitality/events/tourism sectors some slack and make it easier for companies to recover their operations through various schemes. Personally, I'll be buying the dips but then again I'm a long term investor only risking a small amount of capital that I could ultimately afford to lose (event though that is not my intention obviously). If you need access to your money within 12 months I'd be more hesitant to invest now but then again it always depends on your situation and risk appetite. For me, 0.1% interest on a savings account or buying Marstons at 60p I know what I'd rather have!
AIMHO. DYOR. Have a great weekend.
The JV will practically commence once the initial equalisation payment of £239m (Q3). is completed . Integration of the brewing businesses it's infrastructure and distribution facilties will have costs, it is projected full cost savings will not be achieved until year 3.
In return for the equalisation payment Marstons will transfer properties ( Breweries and associated properties) valued at £580m to the new Company, Carlsberg will transfer it's UK Brewing Facilties valued at £200m. Marstons have 6 breweries and Carlsberg 1 main brewery with a small Craft Brewery in London. The assets will disappear from the existing Parent Co's balance sheet, transferring to CMBC of which Marstons have a 40% holding.
Carlsberg is the 4th largest supplier, by value, of beer to the UK market, Marstons are 5th.
Carlsberg have more than double the supply capacity against Marstons at 5.5mllion Hectolitres.
Carlsberg UK import beer and lager from it's parent company in Denmark, precise quantities are not disclosed as is the inclusion or otherwise of this product into CMBC. Is it reasonable to concluded this import is not part of the JV?
Dividends, when earned, from CMBC, will be distributed on the ratio of 60/40.
Cost savings are projected but not until year3, so based on existing gross profits and assuming sales growth will be more or less stagnant, £65.7m is generated which if fully distributed amounts to £39.4m to Carlsberg and £26.3m to Marstons. Marstons current earning from it's Breweries is £44.6m.
Add in the projected savings ( yr 3) of £24m and the possible distribution is £53.8m Carlsberg and £35.9m to Marstons.
For Marstons to retain profits from the Brewery JV equal to those of recent times there must be a 24% increment in disposable profits (dividends) from CMBC.
Marstons shareholders should not be under the illusion dividends from CMBC will flow directly to them, they will not but will be be consolidated into the Parent accounts...used to manage debt, fund development and enhancement of the Pub/Hostelry estate.
The company had projected to spend £90-95m this year on it's estate, having pulled development and re-furbishment too it's Pubs last Summer. It is realised the Pub Estate is in serious need of updating.
Given the success of the JV, Marstons is going to be left with debt of £1+billion, £350million of which is due for repayment in 2023,apart from other short term lending previously identified.
Questor gave an overview of the sector and, imo, did not dig down into fundamentals which support the SP of companys reviewed, MAB have a NAV of 450p and current SP of under 200p. MARS have a NAV of 74p and SP of 60p.
Judge for yourself which is the better investment.
6 breweries for a lager factory and a minority stake at that. Call that a rabbit out of a hat ? Clearly its a pig in a poke.
Interesting comparisons between various brewers etc. Management of debt will be a fundamental issue for many business.
MAB has a relatively modest debt to revenue ratio and significant assets ( over £4billion) which relates to 450p NAV, SP currently under 200p, so well supported.
MARS after reciept from Carlsberg will have a residual debt to gross income of over 100% and NAV of 74p.
MARS will come through given the likehood of a Rights Issue which are popular within the sector currently. and further relieve the debt pile which has for too long acted as a Millstone.
It is strange Tempus has not made more of the asset backing of Company's being promoted.
It is an illusion to believe things will be the same once everything opens up , there are significant headwinds to come.