Pubs group Marston's buoyant after update

Pubs and brewing group Marston's has added more than 6% after it issued an upbeat trading statement.

The company - which includes Pedigree beer and the Pitcher & Piano bar chain - said it was on track to meet market expectations for the full year. Its performance had improved modestly since its annual meeting at the end of January, it added.

It warned that Easter trading - estimated to be around £2m of operating profit - would fall in the second half of the year rather than the first, as happened last year. Like for like sales over the past eight weeks and two days - including Easter - were up 3.1% in its managed pubs business, while beer volumes were up 16% in the first half of the year.

Marston's shares are now 9.75p higher at 166.5p but the update received a mixed reception from the City. Investec issued a buy note, and raised its price target from 128p to 175p. Analyst Matthew Gerard said:

"Trading since January has shown a 'modest improvement' and the company is on track to meet expectations for the full year. This is better than we had expected and justifies the recent strong share price performance. Marston's remains our preferred quality value play in the sector, on 8 times P/E with secure financing to 2013. Clarity on the dividend is likely to follow in May: we assume a 30% cut to pay a 6% yield."

Merrill Lynch was positive on the statement but kept its neutral rating, although it tipped Marston's as a possible takeover target at some point:

"With a long history of dividend returns and little risk of default, we feel that this should comfort investors in the current difficult trading environment.

"Additionally, as one of the smaller listed operators operating across all verticals, we expect Marston's to be a prime consolidation play over the next 24 months."

Altium Securities issued a hold recommendation, but Evolution advised clients to reduce their holdings. Evo analyst Nigel Parson said:

"Marston's trading has not worsened from January's dismal AGM statement, and that should be considered a good result. Consumers in employment may be deferring larger purchase decisions but they are still going to the pub (albeit slightly less often). The key concern remains smaller wet-led tenancies - and Marston's has plenty of them.

"Like all highly leveraged companies, Marston's share price is benefitting from the increased possibility of inflation eroding the real value of its debt. This stock is vulnerable if this particular rally goes into reverse."

The Marston's update has helped lift other pub groups, with Punch Taverns up 15p to 122.5p and Enterprise Inns 15p higher at 128.75p. Both are also given a boost by positive noises from Merrill Lynch.

Overall, leading shares have now moved into positive territory after a nervous start, with oil companies supported by news that the crude price had edged higher. Royal Dutch Shell B shares are up 28p at £14.26 and BP is 3.75p better at 442.25p.

Many of the banks have recovered from their earlier falls, with Barclays now up 2.9p at 198.4p and Lloyds Banking Group 3.1p higher at 91p.

So the FTSE 100 is now ahead 23.82 points at 4012.81, helped by the US futures turning positive after earlier indicating a 51 point opening fall on the Dow Jones Industrial Average. However the FTSE 250 has not benefited, dipping 2.88 points to 7149.28.