I bought into these in December last year, primarily for the yield, but also for the potential growth of one of the better companies in their sector.


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Marston's Fundamentals (MARS)

The accommodation side was actually the reason I bought MARS over the other brewers.

In one of my better moments when I was trawling through the accounts of all the Brewers I find the accommodation section in MARS and a light bulb went off in my head.

I shall patiently hold and see what happens. The challenge for me here is that I'm comfortable enough with the debt and it's structure, it's just that the market isn't.

All the wile interest rates are relatively low the debt is secondary at the moment I think.

Finals are 21st Nov.

I would also like to see the debt come down, trading looks ok, the quieter period before Christmas (Nov- early Dec) is yet to come but I'll stay put and nurse my losses.

As posted before, I've been in these since 2011 - in fact at a price not too different from where we are now!

As I've highlighted in post 289, rising interest rates and their lack of willingness to pay down debt is a worry.

As the venue for the AGM is about 10 miles from where I live I'm going to go and inquire a bit more about the directors attitude to debt. I know from the radio interview they are comfortable with it and accept the city aren't but that's not helping the share price.

I suggest it would be helpful if they were a little more persuasive in explaining why they are happy with the debt when others aren't.

AGM was in January last year so not so long to go.

Annual General Meeting: 23 January 2019.

I can understand the debt concerns by the market and private investors but it really is a priority to fund their roll out of Pub/Accommodation pubs at least in my view.

I've said before on here that having stayed several times in their accommodation pubs I was very impressed, also people are not frequenting pubs like that used to so getting people to stay and providing a really good service on food and Ale is a winner.

If rates do go up I suppose they can then cut the divi accordingly without it interfering with the roll out.

If you do go CC I will be interested to hear what your view is after, The boy Findlayson is the chap to talk to if you can,

JP Morgan Cazenove Overweight 98.70 130.00 125.00 Reiterates

Liberum Capital Buy 99.35 130.00 Reiterates

Liberum Capital Buy 101.30 130.00 Reiterates

Deutsche Bank > 6%

Deutsche bank reduce https://www.moneyam.com/action/news/showArticle?id=6193168

Standard Life Aberdeen plc reduce https://www.moneyam.com/action/news/showArticle?id=6199611

Preliminary results https://www.moneyam.com/action/news/showArticle?id=6214455

Divi maintained @ 7.5p; PE 7; Market is underwhelmed.

Same as everything else on the market George.

"Slow and sure, going in the right direction" might be a good phrase. Nothing surprising, nothing unexpected. Very clear commitments over debt which one would have thought would have helped but clearly didn't make any difference.

Not much for me to do. Collect my 7.5% dividend wait for market attitudes to change. If they don't I'll just keep collecting my dividend.

FWIW :-

Peel Hunt Buy 99.15 125.00 Reiterates

Liberum Capital Buy 99.15 130.00 Reiterates

Shore Capital Buy 99.15 Reiterates

Yes CC you are doing what a lot of other holders are doing at the moment I suspect.

Just noticed that todays volume is above what it is usual for these in recent weeks.

Hit 105 for a few minutes earlier. Bit of a retrace now but will be interesting to see where it finishes today.

Trading Update for the 16 weeks to 19 January 2019

Pubs

Total pub like-for-like sales growth for the period was 1.4% including strong trading over the Christmas fortnight, with like-for-like sales growth of 5.7%. Total pub margins were broadly in line with last year.

In Destination and Premium, like-for-like sales increased by 0.5% in the 16 week period, including like-for-like sales growth of 4.5% in the Christmas fortnight.

In Taverns, trading has continued to be strong with managed and franchised like-for-like sales growth of 3.2% including growth of 8.1% in the Christmas fortnight. The performance of our tenanted and leased estate was robust, with earnings up 1% in the 16 week period.

Marston's Beer Company

We continue to make good progress in Beer Company with total volumes up 3.5% and own brewed and licensed volumes up 2.5% with particularly strong performances in both the Free Trade and Off-Trade channels.

Capital Allocation Update

Following the guidance on cash flow improvements provided in November 2018, the Board have further reviewed capital allocation plans going forward. As a result of this review we are now committed to targeting a £0.2bn reduction in net debt to £1.2bn by 2023.

This will be achieved as follows:

- A reduction in new-build investment to around £25 million per annum from 2020 onwards, with investment weighted towards pubs with accommodation, where we are seeing the strongest returns.

- The disposal of £80-90 million of certain non-core assets in 2020-23.

- Through the improvements in free cash flow set out in November 2018 relating to the final salary pension scheme (which has a modest deficit that is expected to be eliminated within three years), the securitisation, and reduced organic capital expenditure.

Although new-build investment is being scaled back, new-build pubs and accommodation deliver strong returns and will continue to contribute to growth in Group earnings. In addition, the reduced level of estate expansion will facilitate increased focus on generating like-for-like profit growth from the core pub estate.

In light of the actions described above the Board are committed to maintain the dividend at the current level during this period of debt reduction focus.

Commenting, Ralph Findlay, CEO said:

"Marston's continues to perform well and this is a creditable performance in a challenging market. Taverns and the Beer Company both delivered strong trading over the core festive period in particular, continuing the trajectory of recent months, and our managed food-led pubs also returned to growth.

"We operate in increasingly uncertain times from a political and macro-economic perspective and, as such, we remain cautious about the potential consumer outlook until there is more clarity. However, we are confident of delivering further profitable growth this year, whilst focussing on our strategic priorities of generating cash and delivering our stated £0.2bn debt reduction target between 2020 and 2023. In addition, we are committed to maintaining the dividend at the current level during this period and believe that the combination of these actions will drive long term value for shareholders."

There will be a call for sellside analysts at 0730 hours today. Please contact Andy Low at andy.low@instinctif.com or 020 7866 7886 for the dial-in details.

Forthcoming Events

Please find below the forthcoming reporting dates for the Group, which are also available on the investor calendar on our website - www.marstons.co.uk/investors


2019 Interim results

2019 Preliminary Results

15 May 2019

27 November 2019

I went to the AGM today. Not much to report that isn't in the trading update.

In relation to LFL sales, the Chairman said it's a balancing act between increasing sales and increasing margins. They are focused far more on margin than increasing sales right now.

There was a question on the floor about growth markets and whether Marstons are missing out:
1. What plans do they have for zero alcohol beer? (which they already sell and brew)
2. what plans do they have for Marijuana sales given that this has now been legalised in Canada as this would be a natural fit with drinking, smoking and alcohol?

MARSTON’S Q1 CONFERENCE CALL:
Marston’s hosted a conference call following its update on trading to 19 January 2019 and our comments are set out below:
Trading:
• Says sales were ‘satisfactory’. This because margins are being held. Top line LfL sales are not up as much as some competitors.
• Cost mitigation targets are unchanged. MARS is in a slightly better position here as it has fewer units in London and certain city-centres than do some of its competitors.
• Will lower maintenance capex impact LfL sales? Understood but the new build pubs will need less attention & many of the disposals have been of units that require(d) more upkeep.
Balance Sheet & Debt:
• Why do this now? Uncertainty. This is worse than it was a year ago. Also, asked investors. The market has not been rewarding the previous policies over a sustained period of time.
• Group should enhance equity value by reducing debt. It will be clear that the co is not paying dividend out of debt.
• It is ‘prudent for debt reduction’ to take a greater precedence. Debt will be down £200m over the next four years with a held dividend.
• Debt should be ‘below 5x’ within the 5yrs under review.
• Sale & leaseback? Not likely to be any this FY.
• There will be reductions in the level of maintenance capex. The £25m reduction in new build means say 5 fewer new-build pubs and 3-4 pubs with lodges. There is still room for selective corporate activity.
• There are c100 pubs on the books at any one time that MARS is likely to be looking to sell.
• Pension benefits should be in the region of £5m p.a. post the group’s next triennial review
• The group is ‘looking at’ securitisation issues but, as the mark to market hit would be significant at present, this may only occur over time. Will move when the NPV is right.
• What EBITDA will be lost on the pubs to be sold? Perhaps £5m – but this will be mitigated by interest savings.
Langton Comment:
• Marston’s has updated further on its plans to cut debt by £200m over the next four years. The group confirms that it will hold its dividend at current levels.
• Trading is not easy, but Marston’s has a estate of well-managed and well-maintained, largely freehold properties. It is selling product that the consumer would like to buy at a price they are prepared to pay. Lodges, craft brewing and food (in the longer term) remain growth areas. Marston’s is a major brewer and has a large wet-led element to its estate and is well-placed to grow and to create further value for its shareholders.