MARS6 Jan 2010 08:08
Marston’s is mostly a pub operator, deriving income from selling its tenants and licensees drinks, charging them rent, and taking a cut from gaming machines, although it manages about 500 pubs itself.
About 16% of revenues come from brewing. Amongst its famous brews are Marston’s Pedigree, and Banks’s.
The company looks quite strong. It’s profitable in accounting terms, and more so in cash terms, debt came down (albeit by a small fraction) and the only concern about its operating performance is what looks like a temporary decline in profitability.Meanwhile, by putting its pubs up as security, Marston’s reduces the cost of the borrowing and the company will not have to refinance the securitised portion of its debt for decades.But MARS is on the attack. Seemingly, it doesn’t need more cash to survive, but it plans to spend £140m of the £166m it raised accelerating its plan to build sixty new family-friendly pubs over the next three years.
By taking advantage of recession in the property and construction sectors it expects to find new sites more easily and build new pubs more cheaply enabling it to earn a higher return.Its total liabilities, which include other liabilities like the deficit on its pension scheme, are 68% of its total assets. In other words it owes more than half of what it owns.