Marston's sales rise as it plots further pub openings

Brewer and pub operator Marston’s said it had made “good progress” during the year as underlying pre-tax profit is in line with the company’s expectations as it plots further pub, bar and lodging openings.

In a trading update for the year ended 1 October, the FTSE 250 company reported that destination and premium, like-for-like sales were 2.3% ahead of last year including food like-for-like sales growth of 1.7% and beverages like-for-like sales growth of 2.3%.

In the last 10 weeks of the financial year like-for-like sales grew 1.8%.

The company said its operating margin is in line with last year while it had opened 22 new pubs and bars and six lodges during the year.

For its taverns, like-for-like sales increased by 2.7%, with growth of 2% in the last 10 weeks, which includes a “strong performance” in the franchise estate.

In the leased business, like-for-like profits are up about 2%, compared to last year.

The company’s beer brands experienced a 13% rise in volumes and profits are in line with expectations.

Chief executive Ralph Findlay said: "Marston's has delivered another year of solid progress with underlying growth across all of our pub divisions and continued outstanding performance from our market-leading beer business. Trading has continued at similar levels since the year end which is encouraging. In addition, our new pub-restaurants, lodges and Revere premium pubs all continue to perform well.

He said looking forward, the estate is “well balanced” as it has a pipeline of sites to continue its current level of expansion.

During the 2017 financial year Marston’s plans to open at least 22 new pubs and bars and at least five lodges towards the second half of next year.

Greg Johnson, an analyst at Shore Capital estimated that the new opening programme could generate about £9m of additional annual profit with competition for sites is easing.

He said following the update Shore Capital maintains its 2016 financial year profit before tax estimate of £99m, with earnings per share of 13.7p, and looking to 2017 it forecast a further £5m improvement in underlying profitability to £104m, with earnings per share of 14.5p.

“We expect the group to deliver some circa 2% growth in core managed like-for-like sales whilst the group cost of sales are materially hedged for the next year.

“The trading performance continues to demonstrate that management is delivering the business transformation towards a higher quality estate. We believe that the current valuation is too low and retain our buy stance on the stock.”

Shares in Marston’s were up 0.56% to 143.40 at 0810 BST.