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Rick
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...
Barchid,
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.
FD
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.
AIMO DYOR
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.
restrictions on numbers, no max limit of 30.
• The Joint Venture will have a dividend policy the aim of which will be to distribute, annually,
at least an amount equal to 90 per cent of the Joint Venture’s free cash flow to equity (subject
to applicable law and the ability of the directors to adjust dividend payments in the ordinary
course).
10 Adjusted standalone run-rate EBITDA of £21.1 million for Carlsberg UK
• In the period to 31 December 2022, up to £20 million of restructuring costs will be excluded
from the calculation of free cash flow to equity in order to support the dividend payment to
both shareholders.
• CMBC’s operational gross debt may not be incurred above 2x EBITDA without Marston’s
consent, except for in limited circumstances (including to support a dividend to Marston’s
where there has been expenditure outside the business plan).
https://www.marstons.co.uk/docs/jv/2020/Marstons_PLC_forms_JV_Partnership_with_Carlsberg_UK_220520.pdf
The JV rns link on LSE doesn't work so put above from website. Although the JV will pay out to the two parties it is then up to Marstons to consider a dividend or not
I doubt there will be a rights issue-they occur in good times. The Tempus article said no more cash needed so hope that is right. The interims stated debt was being reduced with JV proceeds They also state: An interim dividend has not been proposed for the current period.
There does appear to be one snippet of decent news tucked away in Mars figures this week and that is their pension defecit has dropped from £36.4mill at year end last year to 3.9mill this year.
This is largely due to interest/discount rate changes but I can not recall anyone drawing attention to it before, and it is a significant positive.
Not that it has done the bulls much good so far but isworth bearing in mind
Fairdeáler20 thanks for your post. In other words we dan expect a deeply discounted rights issue.
The problem with reopening pubs is they have so many fixed costs and even when they wrre packed out, some were struggling. On top of that we have to appreciate, this year the festive season is goung to ge very poor as it always is during a recession. Add to that the fact we have to socially distance, it tells you the SP of the new shares will also plunge.
At the end of the last financial year debts of c£1.3billion, interim just announce show loss for 1/2 year of £40m, Banks approved a £70m additonal facilty for 180 days. Banks have deferred Loan repayments until 31st March 2021, Note holders have agreed technical waivers . Net income for current half year is likely to be not pretty.
If I have missed something will someone please correct?
On the positive side Carlsberg will pay in Q3 £239m.
The JV will not provide tangible benefits until year 3, in the mean time Marstons have got to at least tick over and deal with the unknowns following Covid 19.
Along with most other Brewers/Hospitality businesses, who are taking a prudent attitude towards protecting the balance sheets, it would be wise to raise funding and further reduce borrowings.
Do we think there is going to be one?
it's a bit like trying to predict the possibilty of CV19 taking-off again. The fluidity within markets currently it is impossible to say with any level of certainty where share prices will be even day after day.. Anyone who claims to predict where this or any share price will be , are just guessing.
Make up your own mind and stick with it.
anyone think that the sp will go down even further next week or do we think it will go back up hopefully.
because i dont know whether i want to invest in some more shares as they are to cheap not to say yes to or just wait and see what happenes next week.
I’m a long time long term investor. This will be a bumpy ride but if you’re willing to hold you will get the massive upturn benefit from March 23rd next year, due to the obvious closures this year and improvements against like for likes.
I’ll be honest, probably like all of you I was expecting a bit of an upturn this week but now I’m actually happy to hold for the medium term. I did have the fear early June that the price already reflected the reopening price. And I was right. But it will return. Give it time. But obviously do your own research.
In at this level only 40,000 shares but hopefully hit 80p in a few weeks
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.
The Restaurant Group
Andy Hornby is in firefighting mode at the casual dining group, exiting most of the Chiquito chain via an administration, deploying a company voluntary arrangement to shed 125 mainly Frankie & Benny’s outlets and raising £57 million of new equity. Refocusing the business on the excellent Wagamama and Brunning & Price brands is sensible, but the road to success is still long and painful. Avoid
Loungers
It was all going so well. Yet only a year since it floated at 200p a share, the operator of the Lounge and Cosy Club café-bars is languishing at 127p. However, this is a business that is constantly evolving to stay relevant, while its value-for-money proposition should resonate with a post-Covid audience. Its recent £8.3 million share placing provides an extra buffer. Buy
Mitchells & Butlers
One of the few pub groups not to issue shares, but with a well-invested estate and no apparent desire for acquisitions, the £100 million loan secured should provide all the liquidity it needs. Hold
Marston’s
Another pub company to sidestep an equity raise, although it didn’t need one. Instead, Ralph Findlay, chief executive, formed a £780 million joint venture with Carlsberg, collecting £273 million of cash to reduce debt. Pulling this rabbit out of his hat doubled the share price, but it could have further to go. Buy