Analyst: Marston's to receive £18m new-build boost

Marston's should be able to open between 20 and 25 new-build pubs per annum after ear-marking £140m of the £166m its raising through its rights issue for expansion, according to Oriel Secuties analyst Jeffrey Harwood.

He said: "Marston's is well placed to acquire new sites on favourable terms given the pressure on property developers and house builders.

"In addition there is very limited competition for new pub sites as Mitchells & Butlers has largely withdrawn from the market and Whitbread requires much larger sites to incorporate a combined pub restaurant and Premier Inn development. In the current climate Marston's can also take advantage of reduced building costs.

"The group currently has nine sites in its landbank and has an additional 20 sites which are subject to legal or planning consent. A further 25 sites are under offer or in an advanced stage of negotiation and accordingly the group is well placed to sustain an opening programme of 20-25 sites per annum.

"These sites are located throughout the country without any specific geographic bias."

Marston's new build pubs are on high visibility sites and have average sales of over £20,000 per week of which 50-60% is derived from food.

Marston's intends to roll out two types of new build pub.

Forty five "Core Model" pubs will be built at an average cost of £2m. The trading area will be around 3,200 square feet which is 33% larger than the average managed pub of 2,400 square feet.

The second new-build pub type is a 'Magnum Model", which is a larger scale version with a trading area of 4,800 square foot and an average cost of £2.8m. Due to the economies of scale, the larger format delivers superior returns and margins, said Harwood.

He added that the full benefit of the opening programme will not occur in 2012/13 when the profit contribution should be in excess of £18m.