Marston's strategy paying dividends

30th Nov 2011 07:11

Pubs owner and ale brewer Marston's served up a 4.8% increase in annual revenue and saw a robust start to the new financial year with a 3% increase in like-for-like (lfl) sales at its managed pubs in the last eight weeks.Group underlying pre-tax profit rose 9.4% to £80.4m for the 52 weeks ended 1 October 2011 while revenue climbed 4.8% to £682.2m.At its tenanted, leased and franchise business, profit trends have continued to improve gradually and are estimated to be up 2% in the last eight weeks. Its beer brands are performing in line with company expectations.Marston's Inns and Taverns lfl sales are up 2.9% with underlying operating margins up 0.7% and average profit per pub is up 10%.Operating profit at its Pub Company rose 0.6%, with both traditional estate and Retail Agreements in profit growth. Marston's Beer Company revenue climbed 0.4% and operating profit gained 0.6% with group ale volumes up 2%.Commenting on the results chief executive Ralph Findlay said, "We achieved impressive sales and profit growth in each of our businesses despite the challenging consumer environment. Our new-build pub-restaurants; the introduction of franchise agreements in around 350 pubs; and increased commercial support to our tenanted and free trade customers are all contributing to the achievement of our key objectives."The successful implementation of its strategy will create around 1,000 new jobs in 2012, the group said.Final dividend of 3.7p per share has been offered, unchanged from last year.Altium Securities, which rates the shares a "buy", said the projected dividend yield of 6.6% remains a key attraction, while there could be scope for profits upgrades for the current and next financial years."These results highlight a continuing consistent performance against a challenging backdrop. Despite the well flagged consumer headwinds, we believe the organic strategy could lead to low double digit EPS [earnings per share] growth throughout the forecast period, implying upside to our FY 2012 [fiscal 2012] and FY 2013 EPS expectations in due course," the broker said. Broker Peel Hunt also drew attention to the yield, noting that "Marston's has pulled forward the refinancing (previous expiryAugust 2013) and has refinanced £257.5m of bank debt at May 2016 with its fiverelationship banks," which should underpin the dividend yield, and means that "there are few concerns on the balance sheet."Peel Hunt has the shares as a "hold", with a target price of 107p.