Marston's narrows loss but debt weighs on pub group's shares

British pub group Marston's MARS reported a smaller than expected first-half loss on Tuesday, but its shares fell as much as 8% as some analysts worried about its debt pile.

The company said its debt excluding IFRS 16 lease liabilities was 1.16 billion pounds ($1.46 billion) on March 30, down 2% from the end of its last financial year. That's more than five times its market value of 213.4 million pounds, according to LSEG data.

Jefferies analysts said their "underperform" recommendation on the stock stemmed from leverage concerns, but added that further property sales would help reduce debt.

The predominately suburban pub operator expects to sell 50 million pounds of unlicensed properties this financial year, with 9.6 million pounds completed in the first half.

Pub groups, hit hard by the pandemic and then a cost-of-living crisis, are sounding more upbeat as inflation eases and customer spending on food and drinks picks up.

Marston's said it expected an encouraging second half, which typically generates two thirds of its annual pub operating profit.

It expects sporting events this summer like the Euros soccer tournament, the Olympics, and the finale of the English Premier League this weekend to boost sales.

These "must not miss" events, plus upgraded pub gardens, should bring in more customers, CEO Justin Platt said in a statement.

The group, which operates 1,395 pubs, reported a first-half underlying loss before tax of 0.8 million pounds, compared with the 3.6 million pounds loss a year earlier, while underlying pub operating profit rose 22%.

Like-for-like sales in the first six weeks of the second half were up 4%.

($1 = 0.7978 pounds)