A full year trading statement from pubs operator and brewer Marston’s (LON: MARS) on 15 October could provide mixed news. Drinks sales could have been strong in the fourth quarter, but food-based sites are finding trading tougher.
The taverns division has tough comparatives, but that should not stop it producing like-for-like growth in the period and full year like-for-like growth could be 1%.
The destination and premium division is more focused on food. Even after prominent restaurant closures there is a continued oversupply in the eating-out market as demand declines. This is the main uncertainty when it comes to the future. Like-for-like sales are likely to have declined last year and it could remain difficult to achieve any growth next year.
Brewing volumes have been flat but that was in comparison to a period of hot weather and the football world cup. There is underlying growth.
Marstons could start to reduce debt by around £50m a year after paying a similar amount in dividends. That is partly down to reducing capital spending. To put that in perspective, net debt was £1.44bn at the end of March 2019.
There could also be further pub sales to help to cut debt more quickly.
The total dividend is likely to be maintained at 7.5p a share. The yield has fallen since I previously wrote about Marstons because of the rise in the share price but it is still attractive at more than 6%.
Full year underlying pre-tax profit could dip from £104m to £102m and then recover next year – but growth would be modest. That represents a downgrade from £108m a few months ago. Revenues are growing but operating margin is declining.
At 121.5p, the shares are trading on nine times 2018-19 estimated earnings. That reflects the heavy debt burden and uncertainty about short-term trading.