Marston's PLC warned that the brewing joint venture with Carlsberg is no longer expected to make a profit this year as electricity and other costs increase, leading brokers to slash their forecasts and share price targets.
The pub company reported a smaller underlying pre-tax loss of £7.5mln for the half-year to 2 April 2022, down from £122.4mln a year earlier, as revenue surged to £369.7mln from £55.1mln thanks to pubs reopening as pandemic rules were relaxed.
Managed and franchised like-for-like sales were down 3.0% in the first half, with drinks sales outperforming food, but in the last six weeks were in positive territory.
Costs have continued to rise since the last update in January, with electricity costs expected to climb £5mln and the Carlsberg Marston’s Brewing Company (CMBC) is no longer expected to make a profit this year.
While management expects price increases to offset food cost inflation and higher staff retention to offset additional labour cost inflation, broker Peel Hunt cut its full-year pre-tax profit forecasts from £74.4mln to £35.2mln “to reflect CMBC not making a profit this year and cost inflation”.
Forecasts for 2023 are being cut by less, from £84.6mln to £66mln, reflecting a slower recovery at CMBC and higher energy costs.
Due to this, Peel Hunt downgraded its target price from 120p to 90p, but maintained its 'buy' rating.