Tenanted division back in the black at Marston's

16th Mar 2011 07:16

The food offering at brewing and pubs group Marston's is defying consumers' attempts at belt tightening, while even beer sales are up this year.The company said it has "delivered an encouraging and robust performance despite the continued economic uncertainty" in the 23 weeks to 12 March, with profitability in line with expectations.Marston's Inns and Taverns, the group's managed pubs division, saw a 2.4% year on year like for like (lfl) growth in the period, led by food sales, which saw lfl sales grow 4.7%. Even "wet sales" - sales of drinks - are on the up, and showed lfl growth of 1.5%.Like-for-like sales in the past seven weeks were 3.0% ahead of last year. Operating margin is slightly ahead of last year.At Marston's Pub Company, the tenanted and leased pubs division, underlying profit trends have continued to improve, with lfl profits estimated to be 0.1% ahead of last year, which compares favourably to the 4% decline in financial year 2010. The company attributed the improvement primarily to the continuing successful rollout of the franchise-style Retail Agreement, which will be operating in around 190 pubs by the halfway stage of the financial year .In addition, the profit performance of the pubs which will remain on traditional agreements for the long-term is ahead of last year.On the brewing side, the Pedigree ale brewer said own-brewed volumes are up 4% on last year in a market where sales are said to be down by around 7%.The surprising growth in popularity of ale among the 20 to 34 years age group has helped boost sales of premium cask ale in the period by 5% while bottled ale sales are up 16%.Net debt and cash flow are in line with the company's expectations.Evolution said the market remains sceptical over the company's strategic direction and reckons "the key attraction of this stock remains the 6.2% dividend yield." "Marston's has had a good first half helped by softer second quarter comparatives which gives it a small cushion for what is shaping up to be a tougher second half for the consumer. Most notably tenanted like for like profits have edged into positive territory for the fist time in several years," the broker said.Matrix Group said the trading update revealed the group is trading slightly above expectations in terms of its managed pubs performance."The stock is good value, in our view, and could potentially see some small upgrades if current trends continue for the rest of the year," the broker added. "Overall, we think there may be scope to tweak our full-year estimates of profit before tax £80.1m, or earnings per share of 10.8p, but we will leave this until the publication of the interim results in May," matrix said.