Higher drink prices might be giving the government an inflation headache but should be good news for pub owner Marston’s PLC (LSE:MARS).
Peel Hunt expects the company’s tone to be upbeat when it updates on Christmas trading next week (23 January).
“Managed/franchised LFL sales were up 10.1% YoY in 2023. Guest satisfaction and employee engagement scores were strong.
“In early 2024, LFL sales were up 7.4%, still c.300bps ahead of the sector and above our 5% full-year forecast assumption.”
Margins are also improving, said the broker, with £8 million of cost savings (worth 90bps) identified for 2024 in addition to stronger LFL sales.
Peel Hunt expects debt to reduce by £70 million this year while NAV is 101p/share with disposals continuing to occur “at a premium to book value”.
“The PE is just 4.4 and the equity FCF [free cash flow] yield is 23%.
“On any measure, we see significant equity upside potential if the company delivers on its strategy to grow sales and EBITDA [underlying profits] whilst simultaneously reducing net debt.”
Shares were down 2.5% at 32.6p.