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Precisely Pedro, the improvement in performance is evident for all to see. The new CEO's words were also comforting. I think Marston's go on to strength from here, with customers shunning city centres and late night venues, the inherent human need to socialise will be met by Marston's suburban estate of pubs and they are also best placed to take advantage of the summer weather with their superior beer gardens!
While the current situation may not be immediately rewarding for shareholders, the recently agreed extension provides ample time to pursue a larger refinancing opportunity. Property valuations, handled by Christies, are likely to align with improved performance. Although organic debt reduction may seem slow, the target to reduce it to under £1bn by 2026 remains on track, with options to dispose of the JV stake and the additional £6m saved from pension contributions contributing to debt reduction. It's important to note that total liabilities have decreased, and the covenant breach was a technicality given the unrealistic liquidity covenants post-pandemic.
I understand your familiarity with Marston's, and it's clear that it's a robust business with stable revenues and a strong asset base. Patience may be key as the cost of living crisis eases and demand for hospitality and socializing returns.
It seems that your investment strategy may benefit from reassessment, especially considering your consistent negativity towards this stock, which suggests you may have an average hold exceeding the current share price.
Wishing you the best of luck!
Fairdealer, you're quite off the mark:
- Spoons have higher sales but operate on a 5% margin, so it's a very different model.
- The property valuations are based on profit multiples and are expected to happen in July, likely reflecting improved year-over-year performance.
- Debt has decreased by £25m in H1, with only £10m of the £50m disposals target achieved so far.
- Short-term borrowings increased due to less than 1 year on the banking facilities, but they've been extended by another 18 months.
- Pension contributions of £6m per year will fall away at the end of the FY, contributing to debt reduction.
I'd suggest brushing up on your facts if I were you.
I do think the Stonegate news has definitely rocked the hospitality sector and as it is the largest pub co in the UK, it definitely has affected Marston's SP further. However the Stonegate estate is very different to Marston's in that Marston's have very little city centre presence and therefore not affected by issues such as lower footfall and limited transport options (Congestion charges/Train strikes). Marston's pub portfolio is mainly suburban and in residential areas and therefore lends itself to stable and resilient revenues. Not to mention Stonegate and Revolution bars also have nightclubs which are slowly dying a death....
In my opinion everything hinges on the upcoming RCF refinance. According to the published accounts, the bank loan matures in January 2025. If Marston's can secure a bank extension by say July and proceed with a broader refinance by early next year, it could propel the share price to new heights.
JPM have twigged "leverage concerns are overdone". Marston's are sitting on £2.1bn of property assets, CMBC stake valued at £250m, which is greater than the Marston's market cap and a whole load of leasehold pubs which revert back to freehold.
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."