Member Info for londoner7

The biggie in the room - AWPR- was handled well. 2nd half exceptional narrowed down in the call to �10-�20m. Linden gross and net margings ahead of last year and that isn't including land sales which improve margins further. P&R "Strong" Construction - underlying performance continues to improve. I take that to mean beating the H1 0.9% over the full year. (0% in 2017). Putting the guidance PBT numbers and the exceptional (�25 + �10-20m) together I come out with a (wide) range of 145p - 161.4p for adjusted EPS. This includes 2.5 months weighting for the rights issue. Before this update the FT has EPS broker consensus of 144.2p and a broker high of 153p, which is bang on the middle of my numbers above. If I have my numbers right and trading continues as expected till the end of the FY (another 6 weeks) then this is a good update. But of course the rights dilution really kicks in during the next financial year. GFRD would be doing well to achieve the same EPS in FY2019. But hey, we're still looking at a PE of 6.4 on the mid 153p number and a 7.8% dividend yield on 2x cover. Londoner7.

Ftsemajor, I'm unclear about the PBT figure. Does it include exceptions or not (�25m + �?m)? On one interpretation it looks good, or another it looks poor. All should be clear from the call. Extra cash on the AWPR isn't a surprise to me and it looks modest, the question is, how will the market take it. Was the March weather already factored in?

After writting my last post it occured to me that MARS probably don't build standalone lodges other than alongside existing pubs. From the 2017 annual report, "1269 rooms across 62 pubs". Therefore, 335 destination and premium pubs do not have lodges attached. They also said that an integrated pub-lodge building is under design.

OK, thanks for your reply. The reason I asked was that during the latest call the MARS CEO made the comment that building a lodge next to a pub added �300K pa to the pub's revenue. I agree that the lodges are located primarily for travellers and in many case wouldn't justify adding a pub next door, particulary if located remote from local residential trade. But as in the situation described above there may be a case for adding a lodge to an existing pub. The comment was also made that an adjacent lodge smooths the pub trade over the week. In practice I'm sure MARS go to some length in assessing a potential site against the market for a standlone lodge, standalone pub, or an integrated pub-lodge. MARS will have plenty of data from their estate to help make these judgements. The Ebbsfleet lodge with 100 rooms sounds like it could probably support an adjacent pub on it's own but MARS also made the point that there is a significant amount of local housebuilding in developement. On a related point on the conversion of 2-4-1 outlets to a more premium model. I was interested in the comment during the recent presentation about monitoring the cash profit return per customer, rather than the traditional revenue metric. Sounds like smart use of their data and again also allows them to target their �5m conversion spend towards the most suitable outlets. Londoner7

paulem, I understand the thread of your comment until the last sentence. I don't see the connection. Why do you suspect they regret building the joint ventures?

"Being fairly new to investing in shares is there any way I could have predicted this write down?" thirdman, as an investor with 35 years experience my answer is, No! But I guess you'd like me to expand. You're not alone in highlighting the growth in revenue and profit but essentially this growth was purchased with last summer's share placing to acquire Charles Wells. So at these interims my measure was earnings per share (EPS), which was flat. Is that good? IMO yes, considering the impact of the beast from the east. I laid out my thoughts in an earlier post but the point here is where did this 'bolt from the bue' come from. Several publications and commentary are positive on MARS following yesterday's updates yet the price falls by 10%. So maybe buyers of the stock should be less focused on the positives and consider the possible negatives. I can think of a few to consider but I think debt is probably top. I thought a comment yesterday on this BB by Andyagogo captured a good aspect of the debt situation. My take on his point is that with a UK recession in prospect MARS should be cutting their debt at a greater rate than the are and one route to this would be to reduce the dividend - copying the actions of MAB. The argument could be that if MARS is making only marginal reductions in debt in the good times (today), then debt could get out of hand in the bad times (tomorrow). When does 'tomorrow' come and how bad will it be? The sellers take the view that it could come soon and it could be bad. If they are correct then MARS will struggle. That posibility puts pressure on the share price today. How can MARS debt be alleviated in the short to medium term? 1) Grow profits. 2) Cut capital expenditure. 3) Cut dividends. (The first two are not mutually exclusive). Recently MARS mangement approach has been to focus on 1) to the exclusion of 2) & 3). Yesterday MARS cut 2) for 2019 and held 3). This is a change in strategy and the market will take note. in the stock market uncertainty usually leads to volitility. A further complication is MARS fund their expansion plans through a property leasing mechanism, which shows up as debt on the balance sheet while MARS sort of argue it isn't debt in the sense they would like us to understand debt. Confused? So is the market. In conclusion we have a situation ripe with uncertainty. Enter the sharks! You knew about the sharks didn't you? Yes, of course you did. Rule 1) of stock market investment - you swim with sharks. These are the guys and girls you often find out of office hours in city bars, smart suits, good hair cuts, can be a bit loud, but at heart decent people. They are good to their mum and provide for their family. But during office hours their goal is to MAKE MONEY and they have the tools to do it. Show fear and they will leave you bleeding in the gutter. Yesterday, they were swimming in the MARS pool. It isn't nice to watch but they perform a

Hi Spary1, it was a video segment on the CNBC channel 5min before I put out the post. I just went on to the CNBC web site to see it's there but I don't see it. The reporter was Brian Sullivan, reporting from the field. During the day there were various interviews with companies like Devon Energy reporting on price/labour pressures in the Permian. Hardly news. But the report on the pricing discount due to transportation issues got my attention. It also got the attention of the studio reporters so I guess it isn't a well know part of the Permian story. Hence my post.

Just picked up a CNBC segment on the Permian oil price that may have relevance here wrt Welch production and expansion. Oil production in the Permian has grow at a rate that exceeds the ability of producers to move it out. With the WTI price at $71 medium scale producers without pipeline capacity are getting $58-$59 on Permian oil. This capacity constraint is expected to ease next year. Less suprising, jacks and crews are in high demand.

Andyagogo, I took a look and for the benefit of others on this board I'll copy it here. MAB Dividends comment As previously advised the Board is not declaring an interim dividend but will make an assessment of pay-out at the end of the year based on a full year of trading and development of the sector outlook. As previously set out, in making this assessment the Board considers investment to maintain the condition and competitiveness of the existing estate to be of primary importance for the long-term health of the business and would not expect to see a structural, or permanent, increase in the use of short term facilities. IMV this is a very sensible strategy. In considering the debt one does need to decide whether to accept the argument for the property leasing or not. If you do then the debt to consider is 'Debt excluding property leasing'. At the half year stage it is down �2m - a small drop. At the last finals Marston gave numbers for 2012 and 2017 which showed a �93m drop over the period. In the last 6 months the metric has increased by �31m, but I'm not concerned by this becasue of the seasonality of the business. I will be looking at this number at the finals for comparison with last year, and I'll be looking for something better than �2m down. Also agree, "it's progressive if EPS grows", which requires >15p EPS this year. I commented on this earlier. Londoner7

M84, there isn't a dividend here but Breedon is generating cash on your investment. Rather than pay it to you management has chosen to reinvest your all of your returns back into the business. I like a dividend, even if it's just a token payment. Once the mechanism is in place I believe it brings better focus to management on the cap ex or dividend decision. In the absense of a dividend I look very closely at how well mangagement are investing my returns. By my calculation they are getting 16-18% return on capital invested and climbing. So long as there are sufficient projects requiring capital and this return is maintained then I'm happy for this to continue. Large acquisitions, like Hope and Lagan, can cloud the picture so my calculations can get noisy. But I feel, actually I hope, that these acquisitions now define Breedon's geography for the next few years, that is the Islands of Britain and Ireland, and that future acquisitions are infill. Probably the biggest determinant in a company's successful growth is how well capital is invested. The board know this, the institutional investors know this and many PIs know this. By the 5th sept the board will have looked very closely at capital allocation plans following the recent acquisition. I hope that this is a focus of the Q&A session. Londoner7

Expect a trading update Tues next week, as per their web site. Monday's Times also listed GFRD for an update today, but my other source Investor's Chronicle didn't back it up so I suspected it was an error. I'm optimistic about the trading update generally, but all eyes will be on news about the AWPR contract. Perhaps additional cash cost but hopefully not material.

spindok, I understand your point about the offer. In highsight my comments do seem to smack of 'look at me' I called it right. I guess I was just pleased at having identified the potential value of the extra offer which I described here but didn't get a response to. And then we find that very few PIs responded to the offer. I have a full weighting of Breedon so only applied to take advantage of the discount. I sold my allocation on the same day for a profit of �700. There I go again - sorry, moving on. I agree Breedon stock does seem to be stuck in a rut. With the interims moved back 2 months to the 5th Sept, where's the near term action? Well, I would direct you to the Lagan web call. The analysts Berenberg have pushed the rollup acquisition strategy as a key attraction of Breedon for several years but have cooled on this aspect of late. So I wasn't surprised to hear Berenberg ask a question about acquisitions in the light of the Lagan buy. The Breedon spokesman tried to make the case for Breedon performance in this area and finished with a comment along the lines "and you don't know what I know" (or something similar). Alongside the extra potential for acquisitions in the ROI I would not be suprised if we get some news on further acquisitions before the 5th Sept. IMO Breedon's business has been going gang busters. The stock has a habit of idling for long periods and then putting on strong bursts. It's difficult to call where we are in the stock cycle. Londoner7

dyche, Thanks for your clarification. It highlights my poor use of the term 'road fleet'. I had meant the specialised plant that actually lays the asphalt, but your definition of the term is correct and serves to highlight another aspect of the 'surface contract job' that I hadn't appreciated, at least to the extent that they are invovlved in surfacing contracting. That is the fleet of lorries that ferry the product from the quarry and/or asphalt plant to the work site. A couple of years ago I spent a winter in Aukland and over one night watched a team stripping and relaying a long section of Queen Street in the heart of town. Your comment reminded me of the constant stream of lorries running through the night bringing in material. So to recap. Breedon has a growing number of asphalt plant located at quarries and sometimes mobile on large contracts, and a number of contract surfacing hubs, which includes the specalised plant to lay the asphalt with perhaps, in Breedon's case, a dedicated full time crew, which may be expanded on some projects. And also a road fleet of owner-drivers who transport the materials (aggregate and asphalt) as required. I recall from a call that transportation is their largest expense (�100m rings a bell). I also recall a large part of last years cap ex was directed towards replacing a large part of their road fleet. Assuming the fleet carries the Breedon livery. That does leave a question in my mind about ownership of the fleet. Anyway, I contacted Breedon about my thoughts that they may be running down the surface contracting side. The response was firm and clear that that was not the case. "We have always said that this part of our business is a valuable route to market for our material (aggregates and asphalt in particular) and gives us additional security of minerals supply � provided of course that the contracts in which we engage meet our criteria in terms of profitability and risk profile". Which echo your comment on estimates and cost control. Further the respondant described the handling of the highways england project which precisely echoed spogbat's comments. Londoner7

fairdealer20, I agree. Most stocks do trade above their NAV, but to my mind it isn't a big factor in my investment decison. A stock could trade below it's NAV for years. Indeed the NAV could come down to meet the share price. Also the NAV includes intangible assets, typically the goodwill following an acquisition. In the case of Marston's intangibles account for 30% of the NAV quoted. But other factors being equal I would prefer one company with a high tangible net asset value other another. I trust the summer isn't so bad that we are then considering the break up value of Marston's. ;-) Londoner7

Following on. NAV 142p I don't put much weight in the NAV. Marston's isn�t a property company. In my mind the NAV is a number for bankers looking for support of their funding. I'm invested here in the hope and expectation that Marston's will produce results that warrant a valuation higher than their NAV. JDW's share price isn't held back by their relatively low NAV. Dividend As I said earlier, I was disappointed that the dividend didn't get the token 0.1p increase. The CFO said that the decision was based on a payout ratio of 2x, pointing out that an extra 0.1p would have only cost an additional �0.5m cash. I�m not entirely convinced by this - I don�t think the ratio has been applied so rigorously in the past. On that basis to maintain the dividend for the full year would require EPS of 15p for the year. Broker consensus, before these interims, was for 14.1p. However, I'm now optimistic that barring adverse weather events between now and Sept, 15p and perhaps better is achievable. It that occurred and the full year dividend was increased that would be a big positive for sentiment towards the stock. Share price reaction Over the years I've seen what appears to me to be a rational reaction and at other times an irrational reaction by the market to updates. Is it traders exiting? I noted the reaction in the MAB price to what I thought was a decent update - I'm not invested there so I don't know the story. Is it bots who's algorithms may have a sector feed through component and certainly favour wide swings. Who knows? Perhaps there's something hidden in the detail of an update some have missed. As an investor, who had been waiting for a pickup in consumer sentiment before increasing my weighting in Marston's but more recently decided to hold off until these interims, I've decided it is a buying opportunity. Is this the perfect entry point? I doubt it but I'm happy to bring my holding in Marston's to a full weighting. Roll on summer, and improved consumer sentiment. Londoner7

On seeing the results my first emotion was relief that the EPS had held up then disappointment that the interim dividend was kept at 2.7p - I hoped for 2.8p. I got onto the call late but caught the all important Q&A session. Here are my take outs. Consumer sentiment Much is said about consumer sentiment in relation to the sector. Indeed it's a factor which has governed my weighting in Marston's. The recent return to positive wage growth was remarked on by the CEO who said that wages had been a headwind (my term) for the last 12-18 months. But someone else on the board (I think CFO) made the point that sunshine matters. When the sun shines consumer sentiment goes out the window. How true! 2nd half bias I agree with Ligier and thirdman on the significance of the 2nd half. It's important to be aware that Marston's financial year is split between winter (1st half) and summer (2nd half). Marston's earnings in the 2nd half are roughly twice their 1st half earnings. Fixed costs are the same across both halves, with extra staffing covering the busier summer season. Bearing in mind the impact of the 'beast from the east' I had been expecting a brutal first half trading. In the event Marston's produced a flat EPS. I had been expecting higher revenues and profits due to the CW acquisition - the placing was always going to affect the EPS number in the 1st half. That impact is behind us and the 2nd half comparative should benefit. CW synergies should also accrue. The weather may also provide a beneficial comparative. While this summer may be the same as last year's or even worse I think the chances are it will be better, and May has got off to a great start. World Cup Asked the question, Marston's said that the World Cup would provide a positive bias, in part due to the timing of England's early games - positive for pubs, negative for the food led segment. In my experience not all Marston's bars have TV screens. So I know who I'll be supporting this summer - come on the sunshine! Debt The analyst from Stifel was particularly critical in this area. Previously I've commented on the difference between Marston's debt structure and others. The CFO battled on this point - I'm inclined to support him but I get it that not everyone agrees. But the CFO highlighted a change in financial reporting due in a couple of years which will 'level the playing field'. To be continued

"Qualifying Shareholders who have applied for Open Offer Shares will receive the full number of Open Offer Shares applied for by them and those that made an application under the Excess Application Facility will receive 41.0 per cent of Excess Shares applied for by them." Wow! The excess award is much higher than I expected. In my post last month I calculated 1:49 (2%) assuming full take up by PIs representing 15% of capital - the other 85% (IIs)were 'declining'. It seems the vast majority of PIs also declined, leaving more for those that didn't. I had an inclination that might be the case by not on this scale. Well worth the effort! Londoner7

Spogbat, thanks for your reply. I hadn't fully appreciated the distinction between the asphalt plants (producing asphalt) and the contract surfacing (laying the asphalt) as separate business units. In my mind I'd combined the two activities. Looking at the excellent slide of their business model Breedon state that 8%of their aggregate goes into asphalt production and this is used by internal and external road fleets, although they don't reveal the split. In the 2016 Breedon referred to 9 regional contract surfacing hubs accounting for 16% of total 2016 revenues. In 2017 it was <11% of revenue. The % fall was largely due to the additional Hope revenues in cement and RXC, but revenue also fell 5% in absolute terms. Breedon highlighted this in the presentations which lead me to believe they may be winding down this unit, but on reflection it may have been to highlight the lower % of revenues in the division most closely aligned with Carillion activities - a hot topic at the time. I guess 'road fleet' is very much a fixed cost, in terms of both plant and labour, so utilisation rates are key to margin. Using the fleet primarily on smaller jobs, which will have higher margin, then plugging the availability gaps with infill on the bigger, but lower margin, highways England project makes sense. I didn't see any reference to the number of contact hubs for 2017 but assuming (big assumption) it was the same as 2016 then a 5% fall in revenue would translate into a much bigger fall in profit. While I agree it's very much 'foot to the floor' on the build out of asphalt plant, Dowlow, etc. I think the jury's out on expansion of the surface contract hubs. Now that Breedon are providing the numbers it should be easy to see the direction from here. But it appears to me, looking from afar, that with expansion of road construction finally starting up, now could be a good time to be in the surface contract business. So perhaps this unit will be expanded. With the network of asphalt plant Breedon has, good management of any expansion should have a nice impact on the bottom line. Londoner7

spogbat, thanks for the prompt update. You clearly have your finger on the pulse. No doubt there will be cash compensation for the 3 plant excluded. But the highways england news is particularly interesting. At the final results Breedon highlighted the contract surfacing division in a way that lead me to believe it isn't key to forward growth. However, the langan acquisition seems to contradict this view. One could read from the highway england project statement that Breedon are supplying the materials and (less clear) Thomas Bow are supplying the contract services. Do you have a view on this? Best, Londoner7

Wow! I recall arguing a few months back that the share option scheme is a good way to reward employees - assuming they have spare cash. My understanding of the terms when options were introduced many years ago was that the downside was protected, but I hadn't realised that the discount was so good. We know management does well so it's good to see employees sharing in the success of Breedon. Well done! I worked in high tech and at various times had 100s thousands of share options but not a single one ever became a share. Perhaps if I worked for Google nobody would have ever heard of them, or I'd be very rich - I'll never know which ;-) Londoner7