Pub operator Marston’s PLC (LSE:MARS) is a 'buy', according to broker Shore Capital, in the wake of an upbeat trading update.
Marston's this morning delivered a robust pre-close update, for its year ended 30 September, which prompted Shore Capital to lift its full-year profit forecast.
The stockbroker now expects adjusted profit before tax of £71 million, up from £66 million previously, supported by underlying EBITDA of £204 million.
Shore noted that while like-for-like sales growth of 1.6% was softer over the summer, strong profit conversion more than offset the top-line performance.
“Although the LFL print may frustrate, profit conversion has been strong, driving profit upgrades and robust cash generation,” Shore said in a note.
Earnings (EBITDA) margins are now forecast to rise by more than 100 basis points year-on-year, ahead of the broker’s initial estimate of a 30-basis point improvement, it noted.
The upgrade follows a year of active investment, Shore Cap highlighted, with 31 pub refurbishments completed and average weekly turnover across those sites up 23%.
Free cash flow exceeded the pub group's £50 million target, and net debt is expected to fall below £840 million, pushing the ND/EBITDA ratio below 5.0 times.
Shore Capital repeated a 'Buy' rating, whilst saying its net asset value estimate is pitched above 100p per share.
In London, Marston's shares were up 6.6% changing hands at 41.3p.