October 15, 2019 / 12:10 PM / a month ago

UK's Marston's to sell more pubs as profits slide

(Reuters) - British pubs group Marston’s (MARS.L) said on Tuesday annual profits had fallen for the first time in five years, hit by sluggish consumer spending and rising costs, and that it would sell more pubs to cut debt.

Shares in the brewer of Lancaster Bomber, Brakspear and Mansfield beers fell as much as 10% to a two-month low.

Britain’s hospitality sector has been rocked by several major restaurant chain closures in an overcrowded market, while pubs are battling the cost of a higher minimum wage and subdued consumer spending due to the uncertainties surrounding Brexit.

Wolverhampton, central England-based Marston’s, which has around 1,500 managed, franchised and leased pubs, said it now aimed to raise 70 million pounds ($89 million) from pub sales in its 2019-20 fiscal year, up from 40 million previously.

That would help to reduce debt, which stood at 1.4 billion pounds at the end of the 2018-19 fiscal year on Sept. 28, compared with the company’s equity market value of 776 million pounds at Monday’s close.

“We have got more (interested buyers) in progress at the moment than we anticipated would be the case,” Chief Executive Ralph Findlay told Reuters in a phone interview.

“There is strong interest from private equity in this sector. I think that fundamentally is about an appreciation of asset-backed businesses with stable cash flow,” he added.

Earlier this year, Slug and Lettuce pub chain owner Stonegate, owned by private equity fund TDR, proposed buying larger rival Ei Group (EIGE.L) to create Britain’s biggest pub operator.

“With sterling still languishing, perhaps it’s time for another overseas investor to snap this up at a good price before the debt is brought down to a more palatable level,” said Nick Burchett, co-fund manager at Cavendish Asset Management and a Marston’s shareholder.

Marston’s said it expected underlying pretax profit of around 101 million pounds for the year ended Sept. 28, down from 104 million the year before. Canaccord Genuity analysts had forecast an increase to 105 million.

Marston’s, which imports a significant amount of food and some beers, wines and spirits from Europe, said it was prepared for a potentially chaotic Brexit and that it had implemented contingency plans to ensure a smooth Christmas trading period, including identifying potential suppliers from outside Europe.

Reporting by Yadarisa Shabong; Editing by Mark Potter

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